Legislature(2001 - 2002)

05/06/2001 05:33 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                        May 06, 2001                                                                                            
                          5:33 PM                                                                                               
                                                                                                                                
TAPE HFC 01 - 118, Side A                                                                                                       
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House Finance Committee meeting                                                                    
to order at 5:33 PM.                                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Eldon Mulder, Co-Chair                                                                                           
Representative Bill Williams, Co-Chair                                                                                          
Representative Con Bunde, Vice-Chair                                                                                            
Representative Eric Croft                                                                                                       
Representative John Davies                                                                                                      
Representative Carl Moses                                                                                                       
Representative Richard Foster                                                                                                   
Representative John Harris                                                                                                      
Representative Bill Hudson                                                                                                      
Representative Ken Lancaster                                                                                                    
Representative Jim Whitaker                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Eddy Jeans,  Manger, School  Finance and Facilities  Section,                                                                   
Department of  Education and Early Development;  Kurt Parkan,                                                                   
Deputy Commissioner, Department  of Transportation and Public                                                                   
Facilities; Mike Tibbles, Staff, Representative Williams.                                                                       
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
CS SB 174(FIN)                                                                                                                  
          An   Act  relating   to   education  funding;   and                                                                   
          providing for an effective date.                                                                                      
                                                                                                                                
          CS SB  174(FIN) was REPORTED out of  Committee with                                                                   
          a  "do  pass" recommendation  and  with  previously                                                                   
          published   fiscal   impact   note  (#1)   by   the                                                                   
          Department of Revenue.                                                                                                
                                                                                                                                
CSSB 218(TRA) AM                                                                                                                
          An Act  relating to international  airports revenue                                                                   
          bonds and requiring  that the spending plan for the                                                                   
          International  Airports  Construction Fund  include                                                                   
          information  about  the  amounts spent  during  the                                                                   
          previous fiscal  year for cost overruns  on certain                                                                   
          projects and  the identification of time  delays on                                                                   
          certain  projects;  relating to  customer  facility                                                                   
          charges  to  fund  facilities  in  airports  to  be                                                                   
          constructed  without  using  international  airport                                                                   
          revenue  bonds;  and  providing  for  an  effective                                                                   
          date.                                                                                                                 
                                                                                                                                
          HCS SB  218 (TRA)am  was REPORTED out  of Committee                                                                   
          with  a   "do  pass"  recommendation   and  with  a                                                                   
          previously  published  fiscal impact  note (#2)  by                                                                   
          the Department of Revenue.                                                                                            
CS FOR SENATE BILL NO. 174(FIN)                                                                                               
                                                                                                                                
     An Act relating to education funding; and providing for                                                                    
     an effective date.                                                                                                         
                                                                                                                                
EDDY JEANS,  MANGER, SCHOOL  FINANCE AND FACILITIES  SECTION,                                                                   
DEPARTMENT  OF  EDUCATION  AND   EARLY  DEVELOPMENT  provided                                                                   
information on the legislation.  He observed that there is an                                                                   
$18,385.3 million  dollar fiscal note from the  Department of                                                                   
Education and Early Development  attached to the legislation.                                                                   
He reviewed the legislation. The  first section increases the                                                                   
base  student  allocation  from  $3,940  to  $4,010  thousand                                                                   
dollars.  This is  a $70  dollar increase  and generates  $14                                                                   
million  dollars. The  second  section changes  the  required                                                                   
local effort provision of the  foundation formula statute. It                                                                   
establishes the  required local effort  in FY 01 as  the base                                                                   
year.  If the  assessed value  increases  in a  municipality,                                                                   
only 50  percent of the increase  is used in  the calculation                                                                   
assessing an additional 4-mil  local effort in the subsequent                                                                   
year. A new base would be reestablished each year.                                                                              
                                                                                                                                
Representative  Croft questioned  if the  base year  would be                                                                   
1999. Mr. Jeans explained that  the assessed value uses 1999,                                                                   
which  is  what was  used  to  calculate the  required  local                                                                   
effort for FY01. There is a two-year lag time.                                                                                  
                                                                                                                                
Representative  Croft  questioned  the  cost  and  who  would                                                                   
benefit.  He  summarized  that  the  beneficiaries  would  be                                                                   
municipalities with  fast growing assessed values.  Mr. Jeans                                                                   
agreed.  He  noted  that  the FY02  impact  would  be  $3.825                                                                   
million dollars. The spreadsheet  attached to the fiscal note                                                                   
has a detailed analysis.                                                                                                        
                                                                                                                                
Mr. Jeans  noted that section  3 amends statute  dealing with                                                                   
facilities,  which  constitute   a  school  for  school  size                                                                   
adjustments.  The  threshold  was  lowered from  750  to  424                                                                   
students. This would impact two  school districts: Petersburg                                                                   
and Wrangell.  Costs are projected at $560  thousand dollars.                                                                   
The total cost of the legislation  is approximately $18,385.3                                                                   
million dollars.                                                                                                                
                                                                                                                                
In  response to  a question  by Vice-Chair  Bunde, Mr.  Jeans                                                                   
reviewed the spreadsheet attached  to the department's fiscal                                                                   
note. The  first column  shows basic need  with a  $70 dollar                                                                   
student  allocation increase.  The  second  column shows  the                                                                   
impact on the supplemental funding  floor. The Alaska Gateway                                                                   
School District would receive  and additional $7,832 thousand                                                                   
dollars  if there  were no  funding floor.  The third  column                                                                   
shows  the net  increase  in section  one  [column one  minus                                                                   
column 2].  The floor  goes down if  there is a  supplemental                                                                   
funding as the basic need goes up.                                                                                              
                                                                                                                                
Mr.  Jeans observed  that Petersburg's  state  aid and  basic                                                                   
need would go up by $71,552 thousand  dollars. There is not a                                                                   
supplemental funding floor so  they would receive the benefit                                                                   
of  the  full   increase.  The  required  local   effort  for                                                                   
Petersburg has  increased by $41 thousand dollars,  but under                                                                   
section 2  they would  only pay  half. Because the  threshold                                                                   
was lowered  in section  3, Petersburg  would go through  the                                                                   
funding  formula  three times,  as  opposed  to two,  for  an                                                                   
additional  $341,007 thousand  dollars. Their total  increase                                                                   
would be $433,333 thousand dollars.                                                                                             
                                                                                                                                
Representative  Croft questioned what  schools are  below the                                                                   
school  size  of  400.  Mr. Jeans  noted  that  the  original                                                                   
version of SB 174  had a threshold of 400. Hoover  Bay in the                                                                   
Lower  Yukon School  District would  be picked  up at a  400-                                                                   
student  threshold. Hopper  Bay would  have gone through  the                                                                   
formula once at the 400 student  threshold. They currently go                                                                   
through  the formula  twice.  A 400-student  threshold  would                                                                   
have lowered their funding.                                                                                                     
                                                                                                                                
Representative  John Davies referred  to section 2.  He noted                                                                   
that it is a benefit in the form  of a reduced reduction. Mr.                                                                   
Jeans explained that  there is an increase cost  to the state                                                                   
because it is  a reduction in the required  local area, which                                                                   
is  deducted   from  basic  need  to  calculate   state  aid.                                                                   
Representative Davies  observed that school districts  do not                                                                   
receive  any   additional  funding.  Mr.  Jeans   agreed  and                                                                   
explained that  municipalities do  not have to  contribute as                                                                   
much as they would without the  provision. State aid replaces                                                                   
the reduced  local effort.  There are  some districts  at the                                                                   
top  of  the local  contribution  cap.  The  provision  would                                                                   
reduce the municipalities' ability  to contribute more money.                                                                   
If the funding  were placed in the base the cap  would go up.                                                                   
School districts  would have the benefit of  increased school                                                                   
aid  and  municipalities   would  have  the   opportunity  to                                                                   
contribute more money locally.                                                                                                  
                                                                                                                                
Co-Chair Mulder stated that the  net affect is better than an                                                                   
increase in the tax base, in terms  of contribution. He added                                                                   
that in Anchorage's case and increased  tax cap would be more                                                                   
than offset by  the increased contribution. Mr.  Jeans agreed                                                                   
but pointed  out that Anchorage is  not at the cap.  In areas                                                                   
where the  cap is reached the  funding is shifted  from local                                                                   
to state  funding without changing  their position.  There is                                                                   
no  new   money.  State   aid  is   increased,  while   local                                                                   
contribution is decreased.                                                                                                      
                                                                                                                                
Representative Croft  provided members with  Amendment 1(copy                                                                   
on file).                                                                                                                       
                                                                                                                                
Co-Chair Mulder provided members with Amendment 2:                                                                              
                                                                                                                                
     It is  the intent of  the legislature that  any increase                                                                   
     to the  Foundation Formula  will provide an  opportunity                                                                   
     to   move  Alaskan   schools   towards   standards-based                                                                   
     education. The Legislature  intends that any increase in                                                                   
     funding  will pay  for costs  associated with  improving                                                                   
     student   performance  by   developing   standards-based                                                                   
     programs,   including   implementation   of   standards,                                                                   
     aligning  student  assessment   to  standards,  adopting                                                                   
     instructional models based  on basic skills, performance                                                                   
     tasks,  and  projects, and  adopting  a  standards-based                                                                   
     reporting system.                                                                                                          
                                                                                                                                
Co-Chair Mulder  explained that the amendment  adds intent to                                                                   
account for  standards-based education  from the  allocation.                                                                   
The Department  of Education and Early Development  would not                                                                   
be required to provide an additional report.                                                                                    
                                                                                                                                
Co-Chair Mulder  MOVED to  ADOPT Amendment 2.  Representative                                                                   
Croft OBJECTED. He  argued that the increase  would help with                                                                   
the impacts of inflation. He did  not think the intent should                                                                   
apply to foundation formula increases.                                                                                          
                                                                                                                                
Co-Chair Mulder  disagreed and stressed that  education needs                                                                   
to be directed  towards standards-based education.  He stated                                                                   
that  his  support   is  not  directed   toward  inflationary                                                                   
increases. His  support is directed toward trying  to improve                                                                   
output and performance.                                                                                                         
                                                                                                                                
Representative John  Davies disagreed with  Co-Chair Mulder's                                                                   
remarks.  He observed  that the  calculations  were based  on                                                                   
inflationary increases.  He maintained that many  members are                                                                   
looking  at increasing  the base amount  due to  inflationary                                                                   
costs. He  spoke in support  of intent language,  which would                                                                   
state that the Department of Education  and Early Development                                                                   
and school  districts use  their entire  budget as  best they                                                                   
see  fit  to  move  towards  standards-based   education.  He                                                                   
summarized  that  every increased  dollar  would  have to  be                                                                   
attached  to  some specific  effort  that  was aimed  at  the                                                                   
curriculum instead of hiring good  teachers. He stressed that                                                                   
an argument could  be made that hiring good  teachers adds in                                                                   
delivering the goal, but it is  not specific to the activity.                                                                   
                                                                                                                                
Co-Chair  Mulder disagreed  and  maintained that  performance                                                                   
can be  tied to better  teachers. He  stated that there  is a                                                                   
combination of  factors: better teachers, utilization  of new                                                                   
techniques or more exams. He observed  that studies show that                                                                   
putting more  money into education,  for the sake  of putting                                                                   
more  money in,  does  not correlate  to  improved output  or                                                                   
performance.  He wanted  to state  that "we  are putting  new                                                                   
money and we have  expectations when we put the  new money in                                                                   
and that is that performance is going to improve."                                                                              
                                                                                                                                
Representative  Whitaker pointed  out that  the amendment  is                                                                   
intent language  and that school  districts will  spend funds                                                                   
in the manner they feel is appropriate.                                                                                         
                                                                                                                                
Co-Chair  Mulder  stated that  he  discussed  the issue  with                                                                   
school boards and that no one opposed the language.                                                                             
                                                                                                                                
Representative  Croft  argued  that  although  no one  has  a                                                                   
problem  in  seeking  to  increase   performance  though  the                                                                   
addition,  that  school  districts   would  take  the  intent                                                                   
language  seriously.  He  felt that  school  districts  would                                                                   
attempt to follow  the intent and that the  legislature would                                                                   
hold them accountable. The intent  language states that: "any                                                                   
increase  in  funding  will pay  for  costs  associated  with                                                                   
improving student  performance…" He observed that  the intent                                                                   
language  specifies  the  means  of achieving  his  end:  "by                                                                   
developing      standards-based      programs,      including                                                                   
implementation of  standards, aligning student  assessment to                                                                   
standards,  adopting  instructional  models  based  on  basic                                                                   
skills,  performance  tasks,  and projects,  and  adopting  a                                                                   
standards-based  reporting  system."  He  observed  that  the                                                                   
language does not include the hiring of new teachers.                                                                           
                                                                                                                                
Representative  John Davies  MOVED  to AMEND  Amendment 2  to                                                                   
delete "any" and add "the":                                                                                                     
                                                                                                                                
     It is the intent of the legislature  that [any] increase                                                                   
     to the  Foundation Formula  will provide an  opportunity                                                                   
     to   move  Alaskan   schools   towards   standards-based                                                                   
     education.  The  Legislature   intends  that  the  [any]                                                                 
     increase in  funding will pay for costs  associated with                                                                   
     improving student  performance by developing  standards-                                                                   
     based programs,  including implementation  of standards,                                                                   
     aligning  student  assessment   to  standards,  adopting                                                                   
     instructional models based  on basic skills, performance                                                                   
     tasks,  and  projects, and  adopting  a  standards-based                                                                   
     reporting system.                                                                                                          
                                                                                                                                
There being  NO OBJECTION, the  amendment to Amendment  2 was                                                                   
adopted. There being NO OBJECTION, Amendment 2 was adopted.                                                                     
                                                                                                                                
Representative  Whitaker felt  that  it would  hard to  argue                                                                   
against the hiring of new teachers.                                                                                             
                                                                                                                                
Representative   Croft  MOVED  to   ADOPT  Amendment   1.  He                                                                   
explained that  the amendment would  delete sections 2  and 3                                                                   
and increase the base amount.  The base amount would increase                                                                   
by  $30 million  dollars  and $10  million  dollars would  be                                                                   
added for quality  school funding. The amendment  would add a                                                                   
total of $40  million dollars. He argued that  the 50 percent                                                                   
provision comes "out  of no where and has  ramifications that                                                                   
I don't  yet fully  understand." He noted  that SB  174 [with                                                                   
the amendment] would put in about  the same [amount of school                                                                   
funding]  as HB  105.  He stressed  that  there are  dramatic                                                                   
differences in  winners and losers. He provided  members with                                                                   
a spreadsheet  demonstrating  the effect  of Amendment  1 and                                                                   
pointed  out  that  Petersburg  and  Wrangell  are  the  main                                                                   
beneficiaries of SB 174.                                                                                                        
                                                                                                                                
Co-Chair  Mulder spoke  against  the amendment  and  observed                                                                   
that  the  amendment  would add  an  additional  $20  million                                                                   
dollars.                                                                                                                        
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Croft, Davies, Moses                                                                                                  
OPPOSED:  Bunde,    Foster,   Harris,   Hudson,    Lancaster,                                                                   
          Whitaker, Mulder, Williams                                                                                            
                                                                                                                                
The MOTION FAILED (3-8).                                                                                                        
                                                                                                                                
Representative Croft  MOVED to delete "425" and  add "400" on                                                                   
page 2,  lines 16 and  22. Mr. Jeans  explained that  the 400                                                                   
threshold adversely affect Hopper  Bay. The Senate change was                                                                   
made to  protect Hopper Bay.  Any school that  serves between                                                                   
10 and 100 students  gets counted as one school.  A community                                                                   
with an  ADM of 101  to 750 gets  counted as two  schools. He                                                                   
explained  that Petersburg  and Wrangell  have three  schools                                                                   
but they have been counted as  if there are only two schools.                                                                   
Hopper Bay has a single facility  in rural Alaska serving 400                                                                   
students. Since  the language states that each  facility that                                                                   
is administered as a separate  school shall be counted as one                                                                   
school  under the  section, which  would be  changed to  400,                                                                   
Hopper Bay would be reduced from two to one school.                                                                             
                                                                                                                                
Representative Croft WITHDREW his Amendment.                                                                                    
                                                                                                                                
Representative  John  Davies  asked  the  intent  of  the  50                                                                   
percent  provision. Mr.  Jeans noted  that the amendment  was                                                                   
added in  the Senate Finance Committee.  He did not  know the                                                                   
intent.                                                                                                                         
                                                                                                                                
Representative  Foster MOVED to  report CS  174 (RLS)  out of                                                                   
Committee with  the accompanying fiscal note.  There being NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
CS FOR SENATE BILL 218(TRA) AM                                                                                                
                                                                                                                                
     An Act relating to international  airports revenue bonds                                                                   
     and   requiring   that  the   spending   plan  for   the                                                                   
     International   Airports   Construction   Fund   include                                                                   
     information about the amounts  spent during the previous                                                                   
     fiscal year  for cost overruns  on certain  projects and                                                                   
     the identification  of time delays on  certain projects;                                                                   
     relating   to   customer   facility  charges   to   fund                                                                   
     facilities in  airports to be constructed  without using                                                                   
     international airport  revenue bonds; and  providing for                                                                   
     an effective date.                                                                                                         
                                                                                                                                
KURT    PARKAN,    DEPUTY   COMMISSIONER,    DEPARTMENT    OF                                                                   
TRANSPORTATION AND PUBLIC FACILITIES  testified in support of                                                                   
the   legislation.   He  explained   that   the   legislation                                                                   
authorizes  revenue bonds for  financing capital  improvement                                                                   
projects at the international  airport systems: Fairbanks and                                                                   
Anchorage. The  airlines requested a new method  of financing                                                                   
the annual capital  improvement program at the  airports. The                                                                   
state  of  Alaska  agreed  and  the  legislation  would  debt                                                                   
finance  the annual  capital improvements  project (CIP)  for                                                                   
the two  airports. He  clarified that  the annual CIP's  have                                                                   
been cash  funded through  the International Airport  Revenue                                                                   
Fund. The  airlines have  requested debt  financing to  allow                                                                   
the cost  to be paid  overtime. Debt financing  authorization                                                                   
would be  increased. There are  two years of CIP  included in                                                                   
the bill. The airlines that use  the system pay for projects.                                                                   
                                                                                                                                
Representative  Foster MOVED to  report CSSB 218  (TRA)am out                                                                   
of Committee with  the accompanying fiscal note.  There being                                                                   
NO OBJECTION, it was so ordered.                                                                                                
                                                                                                                                
HCS SB 218 (TRA)am  was REPORTED out of Committee  with a "do                                                                   
pass" recommendation  and with a previously  published fiscal                                                                   
impact note (#2) by the Department of Revenue.                                                                                  
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 6:20 p.m.                                                                                          

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