Legislature(1999 - 2000)
04/26/2000 12:15 PM House BUD
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
JOINT COMMITTEE ON LEGISLATIVE BUDGET AND AUDIT
April 26, 2000
12:15 p.m.
MEMBERS PRESENT
Representative Gail Phillips, Chair
Representative Con Bunde
Representative Eric Croft
Representative Gary Davis
Senator Randy Phillips, Vice Chair
Senator Al Adams
Senator Rick Halford
Senator Gary Wilken
MEMBERS ABSENT
Representative Gene Therriault
Representative Eldon Mulder (Alternate)
Senator Sean Parnell
Senator Drue Pearce (Alternate)
COMMITTEE CALENDAR
APPROVAL OF MINUTES
MINIMUM EXPENDITURE FOR INSTRUCTION ANNUAL REPORT
EXECUTIVE SESSION
AUDIT REPORTS
OTHER COMMITTEE BUSINESS
WITNESS REGISTER
RICHARD CROSS, Commissioner
Department of Education & Early Development
801 West Tenth Street, Suite 200
Juneau, Alaska 99801-1894
POSITION STATEMENT: Introduced and explained the Minimum
Expenditure for Instruction Annual Report.
EDDY JEANS, Manager
School Finance and Facilities Section
Department of Education and Early Development
801 West Tenth Street, Suite 200
Juneau, Alaska 99801-1894
POSITION STATEMENT: Answered questions on the Minimum
Expenditure for Instruction Annual Report.
ACTION NARRATIVE
TAPE 00-5, SIDE A
Number 0001
CHAIR GAIL PHILLIPS called the Joint Committee on Legislative
Budget and Audit meeting to order at 12:15 p.m. Members present
at the call to order were Representatives Phillips, Bunde, Croft
and Davis, and Senators Phillips and Wilken. Senators Adams and
Halford arrived as the meeting was in progress.
APPROVAL OF MINUTES
CHAIR PHILLIPS indicated that the first order of business was the
approval of the minutes from the Legislative Budget and Audit
Committee meeting held on March 2, 2000.
SENATOR PHILLIPS made a motion to approve the minutes from the
March 2, 2000, meeting.
CHAIR PHILLIPS asked whether there were any objections. There
being none, the minutes from the March 2, 2000, meeting were
approved as read.
MINIMUM EXPENDITURE FOR INSTRUCTION ANNUAL REPORT
CHAIR PHILLIPS announced that the next order of business was the
Minimum Expenditure For Instruction Annual Report presented by
Commissioner Richard Cross, Karen Rehfeld and Eddy Jeans from the
Department of Education & Early Development.
RICHARD CROSS, Commissioner, Department of Education & Early
Development, stated that they appreciate the opportunity to
discuss the report, which is required under AS 14.17.520. The
report comes out of a requirement of legislation to ensure that
school districts are committing a percentage of their
expenditures toward instruction and not for other purposes. The
law that was passed had an escalated requirement: the first
year, it was 60 percent; the second year, it was 65 percent; and
in the future it will be 70 percent.
COMMISSIONER CROSS explained that the department has been in the
process, over the last two years, of implementing the
requirement; they are strong advocates of the requirement. There
was a good deal of cynicism, when the legislation was passed,
[because of a perception] that the mechanism was overly simple
and would not work, but the department did not share that view.
The department is in support of any mechanism that drives money
toward instruction and away from other costs in the districts, to
seriously get on with the task of getting the test implemented.
They used, as a basis for getting started, the McDowell study
that was used to develop SB 36, which is now the current law.
One of the primary issues in the McDowell study was that there
was an inconsistency in data reported from one school district to
the next. It was suggested that the department submit a report
to, among other things, improve the quality [and] the consistency
of the data reported by districts.
COMMISSIONER CROSS noted that in the McDowell study the author,
David Teal, coined the phrase "friendly audit cop." What he
believes was meant by that, especially the "friendly" part, was
that the McDowell group noticed a wide inconsistency in data, had
a broad experience in working with data, and knew that
cooperation was the best way to get clean data. For instance, in
an aggressive audit situation the type of resistance that can
occur could make it take years to get the data collected.
Although they suggested that the department have auditors begin
aggressively looking at and comparing data between districts in
cleaning it up, they also suggested that it would require the
cooperation of districts to make that happen.
COMMISSIONER CROSS reported that the first order of business they
had to deal with was what expenditures should go into
instruction. They worked with the bill sponsor to make the
preliminary Board of Education regulation regarding which parts
of the current chart of accounts should be considered as parts of
the instructional component, knowing that they would be
continuously working to clean up the data and eventually would
move to a new chart of accounts that would require a higher level
of consistency between districts. The current chart of accounts
was not put together with these type of tests in mind. In other
words, it is a chart that allowed broad latitude in districts and
allowed them to make some broad decisions regarding placement of
certain expenditures, which is one of the reasons that the
McDowell group had so much trouble making comparisons. He
explained that they need to move to a new chart of accounts that
has the philosophy of consistency behind it; they believe they
will have that chart together by the 2002 review cycle.
COMMISSIONER CROSS noted that the first year they implemented it,
the legislation passed and was effective June 30, and districts
were already in the process of submitting their budgets and
audits. Therefore, the first year they ran some broad tests that
primarily focused on central administrative expenditures. This
year they made a broader set of tests. They were concerned when
they saw that there had been some significant changes in
reporting from the prior year; in other words, with what they saw
as no apparent change in the way of doing business, there was a
significant [change] in the way that expenditures were reported.
On that basis, they rejected 35 school district budgets this
year. They sent a letter asking for further information in order
to make a judgment as to why those expenditures had occurred.
Retrospectively, they admit that it was a pretty aggressive
letter, and it created quite a fir storm. He thinks that their
intent was a correct one, but perhaps their approach needed to be
softened; the final fallout has ended up being very positive.
COMMISSIONER CROSS further explained that two audit firms -
Mikunda Cottrell & Company and Altman Rogers & Company - [audit]
most of the school districts in the state; they had advised the
districts to be pretty tough in terms of responding to the
letter. He said that he met with the principal partners of both
firms and explained that the purpose was to be able to give the
legislature and the people of Alaska a good way of comparing how
one district was spending relative to the others. Although the
approach was a little aggressive - and in the future they would
do it differently - their purpose was serious, and they do want
consistent data. The firms agreed that it was important to have
consistent data, and they agreed that they could help them do
that. In other words, the approach recommended by the McDowell
group, a cooperative approach, would be the most successful. He
indicated that they have met with the school business officials
since that meeting and explained why they did what they did, and
asked for their help in the future; the earnest response was an
offer to help in the future.
COMMISSIONER CROSS noted that the other issue is whether the
principal of a school should be considered to be a part of the
instructional component. He pointed out that when the bill and
the concept were being considered, nearly every district in the
state told them that they should be testifying against the
concept. He noted that they refused to testify against it. To
testify that they are not in support of something that is trying
to drive dollars into instruction is not something they could, in
good faith, do.
COMMISSIONER CROSS said he believes that the districts have come
a long way over the last two years. They are trying to improve
the quality of their data and to comply with the intent of the
legislation. They came so far as to begin to talk about
particular areas that they thought should be included in the
instruction. In the initial regulation, "building supervision"
was not included as the instructional component. The school
districts, unanimously, advocated for and told them that all the
research in the country points out that "instructional
supervision" is one of the most important components of an
effective school.
COMMISSIONER CROSS explained that the daily supervision of
teachers has to be, and is, an important part of the
instructional component. One inconsistency they saw in the 35
budgets they rejected was that school districts were shifting
their building supervision from a principal, who could supervise
teachers, to a head teacher, who could not; therefore, the daily
supervision of teachers was going away, particularly in smaller
schools. They saw it as a bad trend, one they wanted to stop.
They did not want districts to continue to replace B-certified
principals with people in the same bargaining unit as the head
teachers who were not required to have B-certification.
COMMISSIONER CROSS reported that he had asked the Board of
Education to make a change; in doing so, they made a sweeping
change in that they included non-instructional components because
of the way the current chart of accounts was set up. It is their
intent to break out the chart of accounts so that only those
people involved in the direct supervision of teachers are
included in the instructional component.
COMMISSIONER CROSS further pointed out that the school business
officials, in the idea of the "friendly audit cop," were the
first people to come forward and help them do it. It is not the
intent of the Board of Education or himself to argue or allow to
continue an idea that non-instructional costs of schools should
be included in the instructional component. It is important that
the person who is directly supervising teachers be a part of the
instructional component. It is for that reason that they decided
to move forward.
Number 1122
CHAIR PHILLIPS indicated that one of the concerns is that more
than a quarter of the schools are still requesting waivers. She
pointed out that the chart of accounts is going to be a big
factor, and she expressed concern that it will take until 2002.
She asked if they could get it done in time for 2001.
COMMISSIONER CROSS responded that they have approached it from
the idea of making steady incremental progress, and not jumping
too soon and ending up having to retreat. He thinks they can
make incremental progress and certainly clean up the issue of
where instructional expenditures are reported, insofar as the
direct supervision of teachers is concerned. What they are
trying to avoid is having a rolling chart of accounts or
continually updating them.
CHAIR PHILLIPS wondered whether, if they are fortunate enough to
get a school bond package out this year, the new schools will be
able to bring their scores up considerably based on maintenance
and care of the facility.
COMMISSIONER CROSS indicated that it should be true, and he has
told the sponsors of the legislation that it may even be a better
tool than they intended. He believes it really is making people
focus on where they are spending their money. As they move
along, people are going to revisit everything outside of the
instructional expenditure and look for ways to decrease it.
SENATOR WILKEN requested clarification that in the next school
year they will be expecting to have 53 school districts on the
uniform chart of accounts.
EDDY JEANS, Manager, School Finance and Facilities Section,
Department of Education and Early Development, clarified that the
school districts are using the existing chart of accounts; as
Commissioner Cross pointed out, the reason for the timing is they
cannot expect school districts to change their accounting systems
for July 1 at this time, but they do anticipate to have the
revised chart of accounts in place for the 2002 budget cycle.
SENATOR WILKEN referred to the spreadsheet on page 10 of the
annual report. He said that if they take Alaska Gateway as an
example, their goal was 60 percent and their budget was 62
percent. He wondered if that is the audit or the Certified
Public Accountant (CPA) audit.
MR. JEANS replied that it is the CPA audit.
EXECUTIVE SESSION
SENATOR PHILLIPS made a motion, in accordance with Title 44, to
move to executive session for the purpose of discussing audit
reports, which are held confidential by law. There being no
objection, the committee went into executive session at 1:00 p.m.
CHAIR PHILLIPS requested that the following people attend the
executive session: Pat Davidson (Legislative Auditor) and staff;
David Teal (Legislative Fiscal Analyst) and staff; and Pat
Hartley (Legislative Budget and Audit Committee Aide).
SENATOR PHILLIPS made a motion to move back into public session.
There being no objection, the committee was back in public
session at 1:32 p.m.
AUDIT REPORTS
SENATOR PHILLIPS made a motion to release the following two
special audits to the public: DOR/Alaska Housing Finance
Corporation, Financial Analysis (04-4608-00) and DHSS/DFYS -
Follow-up Review of Select Aspects of Child Protection Services
Operations (06-4604-00). There being no objection, the two
special audits were released to the public.
OTHER COMMITTEE BUSINESS
CHAIR PHILLIPS announced that she had requested an audit request
for the Alaska Department of Fish & Game (ADF&G) mariculture
development.
SENATOR PHILLIPS moved the audit request for the ADF&G
mariculture development and asked unanimous consent.
REPRESENTATIVE CROFT objected. He explained that they often
phrase their requests, "Check into how much cooperation there has
been. Check into the reasons for the delay." This audit is
phrased, "There has been little cooperation, been met with
systematic delays." He noted that they are stating the
conclusions in the audits.
CHAIR PHILLIPS replied yes, specifically, after a three-year
period of time.
REPRESENTATIVE CROFT said he thinks they do a better job of
asking for audit conclusions when they do not try to predetermine
the results. He pointed out that the areas Representative
Phillips is asking for are perfectly appropriate, but he had
objected to the way that she was asking. He removed his
objection to the audit.
SENATOR HALFORD indicated he somewhat concurred with
Representative Croft. He pointed out that it is an area where
people want to privatize a public resource, and it should be done
carefully.
CHAIR PHILLIPS asked if there were any more objections. There
being none, the audit request was approved.
ADJOURNMENT
CHAIR PHILLIPS adjourned the Joint Legislative Budget and Audit
Committee meeting at 1:35 p.m.
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