03/25/1998 03:05 PM House HES
| Audio | Topic |
|---|
+ teleconferenced
= bill was previously heard/scheduled
HOUSE HEALTH, EDUCATION AND SOCIAL
SERVICES STANDING COMMITTEE
March 25, 1998
3:05 p.m.
MEMBERS PRESENT
Representative Con Bunde, Chairman
Representative Joe Green, Vice Chairman
Representative Brian Porter
Representative Fred Dyson
Representative J. Allen Kemplen
Representative Tom Brice
MEMBERS ABSENT
Representative Al Vezey
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 36(FIN) am
"An Act relating to public schools; relating to the definition of
a school district, to the transportation of students, to employment
of chief school administrators, to school district layoff plans, to
the special education service agency, and to the child care grant
program; and providing for an effective date."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: SB 36
SHORT TITLE: PUBLIC SCHOOL FUNDING
SPONSOR(S): SENATOR(S) PHILLIPS, Taylor, Halford, Wilken,
Torgerson
Jrn-Date Jrn-Page Action
01/13/97 24 (S) PREFILE RELEASED 1/10/97
01/13/97 24 (S) READ THE FIRST TIME - REFERRAL(S)
01/13/97 24 (S) HES, FIN
02/12/97 (S) HES AT 9:00 AM BUTROVICH ROOM 205
02/12/97 (S) MINUTE(HES)
02/27/97 542 (S) COSPONSOR(S): HALFORD
03/14/97 (S) HES AT 9:00 AM BUTROVICH ROOM 205
03/14/97 (S) MINUTE(HES)
03/17/97 (S) HES AT 9:00 AM BUTROVICH ROOM 205
03/17/97 (S) MINUTE(HES)
03/19/97 (S) HES AT 9:00 AM BUTROVICH ROOM 205
03/19/97 (S) MINUTE(HES)
03/21/97 (S) HES AT 9:00 AM BUTROVICH ROOM 205
03/21/97 (S) MINUTE(HES)
05/05/97 (S) HES AT 3:15 PM BUTROVICH ROOM 205
05/05/97 (S) MINUTE(HES)
05/06/97 1712 (S) HES RPT 1AM 3NR
05/06/97 1712 (S) AM: WILKEN; NR: GREEN, LEMAN, ELLIS
05/06/97 1712 (S) FISCAL NOTES (DOE-2)
11/12/97 (S) MINUTE(HES)
01/23/98 (S) FIN AT 8:45 AM SENATE FINANCE 532
02/03/98 (S) FIN AT 9:00 AM SENATE FINANCE 532
02/03/98 (S) FIN AT 6:30 PM SENATE FINANCE 532
02/24/98 (S) FIN AT 8:30 AM SENATE FINANCE 532
02/26/98 (S) FIN AT 8:30 AM SENATE FINANCE 532
02/26/98 (S) FIN AT 6:00 PM SENATE FINANCE 532
02/27/98 (S) FIN AT 4:30 PM SENATE FINANCE 532
02/28/98 (S) FIN AT 10:00 AM SENATE FINANCE 532
03/02/98 2705 (S) COSPONSOR: WILKEN
03/03/98 (S) FIN AT 8:30 AM SENATE FINANCE 532
03/03/98 (S) FIN AT 4:30 PM SENATE FINANCE 532
03/04/98 (S) FIN AT 10:00 AM SENATE FINANCE 532
03/04/98 (S) FIN AT 4:30 PM SENATE FINANCE 532
03/06/98 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/09/98 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/09/98 (S) RLS AT 11:45 AM FAHRENKAMP RM 203
03/09/98 (S) FIN AT 4:30 PM SENATE FINANCE 532
03/09/98 (S) MINUTE(RLS)
03/10/98 (S) RLS AT 1:15 PM FAHRENKAMP RM 203
03/10/98 (S) MINUTE(RLS)
03/10/98 2805 (S) FIN RPT CS 5DP 1NR 1DNP NEW TITLE
03/10/98 2806 (S) DP: SHARP, PHILLIPS, PARNELL,
TORGERSON
03/10/98 2806 (S) DONLEY NR: PEARCE DNP: ADAMS
03/10/98 2806 (S) FISCAL NOTE TO CS (DOE)
03/10/98 2806 (S) ZERO FISCAL NOTE TO CS (LABOR, REV)
03/10/98 2808 (S) RULES TO CALENDAR & 1 OTHER REC 3/10
03/10/98 2809 (S) READ THE SECOND TIME
03/10/98 2809 (S) MOTION TO ADOPT FIN CS
03/10/98 2810 (S) FIN CS Y14 N5 E1
03/10/98 2810 (S) AM NO 1 ADOPTED UNAN CONSENT
03/10/98 2811 (S) AM NO 2 ADOPTED UNAN CONSENT
03/10/98 2811 (S) AM NO 3 ADOPTED UNAN CONSENT
03/10/98 2811 (S) AM NO 4 WITHDRAWN
03/10/98 2812 (S) AM NO 5 FAILED Y5 N14 E1
03/10/98 2814 (S) AM NO 6 FAILED Y4 N15 E1
03/10/98 2814 (S) AM NO 7 FAILED Y5 N14 E1
03/10/98 2815 (S) AM NO 8 NOT OFFERED
03/10/98 2815 (S) AM NO 9 FAILED Y5 N14 E1
03/10/98 2816 (S) AM NO 10 FAILED Y5 N14 E1
03/10/98 2817 (S) ADVANCED TO THIRD READING UNAN
CONSENT
03/10/98 2817 (S) READ THE THIRD TIME CSSB 36(FIN) AM
03/10/98 2817 (S) COSPONSOR: TORGERSON
03/10/98 2817 (S) PASSED Y12 N7 E1
03/10/98 2818 (S) EFFECTIVE DATE ADPTD Y18 N1 E1
03/10/98 2818 (S) ADAMS NOTICE OF RECONSIDERATION
03/11/98 2829 (S) RECON TAKEN UP - IN THIRD READING
03/11/98 2830 (S) PASSED ON RECONSIDERATION Y12 N8
03/11/98 2830 (S) EFFECTIVE DATE ADPTD Y18 N2
03/11/98 2831 (S) TRANSMITTED TO (H)
03/13/98 2613 (H) READ THE FIRST TIME - REFERRAL(S)
03/13/98 2613 (H) HES, FINANCE
03/21/98 (H) HES AT 1:00 PM CAPITOL 106
03/21/98 (H) MINUTE(HES)
03/25/98 (H) HES AT 3:00 PM CAPITOL 106
WITNESS REGISTER
RICHARD CROSS, Deputy Commissioner
Department of Education
801 West 10th Street, Suite 200
Juneau, Alaska 99801-1894
Telephone: (907) 465-8678
POSITION STATEMENT: Testified in opposition to CSSB 36(FIN)am.
EDDY JEANS, Manager
School Finance Section
Education Support Services
Department of Education
801 West 10th Street, Suite 200
Juneau, Alaska 99801-1894
Telephone: (907) 465-2891
POSITION STATEMENT: Testified in opposition to CSSB 36(FIN)am.
SENATOR GARY WILKEN
Alaska State Legislator
Capitol Building, Room 510
Juneau, Alaska 99801-1182
Telephone: (907) 465-3709
POSITION STATEMENT: Provided comments as co-sponsor of CSSB 36
(FIN)am.
ERIC MCDOWELL, Senior Partner
McDowell Group
416 Harris Street
Juneau, Alaska 99801
Telephone: (907) 586-6126
POSITION STATEMENT: Testified on CSSB 36(FIN)am.
DAVID TEAL, Senior Analyst
McDowell Group
416 Harris Street
Juneau, Alaska 99801
Telephone: (907) 586-6126
POSITION STATEMENT: Testified on CSSB 36(FIN)am.
JERRY BURNETT, Legislative Assistant
to Senator Randy Phillips
Alaska State Legislature
Capitol Building, Room 103
Juneau, Alaska 99801-1182
Telephone: (907) 465-4949
POSITION STATEMENT: Answered questions on Amendment 2.
ACTION NARRATIVE
TAPE 98-33, SIDE A
Number 0007
CHAIRMAN CON BUNDE called the House Health, Education and Social
Services Standing Committee meeting to order at 3:05 p.m. Members
present at the call to order were Representatives Bunde, Green,
Porter, Kemplen and Brice. Representative Dyson arrived at 4:20
p.m. and Representative Vezey was absent.
CSSB 36(FIN) am - PUBLIC SCHOOL FUNDING
Number 0037
CHAIRMAN BUNDE announced the committee would be hearing CSSB
36(FIN) am, "An Act relating to public schools; relating to the
definition of a school district, to the transportation of students,
to employment of chief school administrators, to school district
layoff plans, to the special education service agency, and to the
child care grant program; and providing for an effective date." He
said the committee had received an overview of the legislation at
the last meeting, and today the Department of Education would be
presenting their comments. He asked Richard Cross and Eddy Jeans
to come forward and present the department's comments.
Number 0089
RICHARD CROSS, Deputy Commissioner, Department of Education, said
he and Mr. Jeans would like to go through the bill line-by-line,
discuss the technical areas of concern, and explain the updated
spreadsheets. Their comments would be based on Version 0-
LS0070\R.a, CSSB 36(FIN)am; he and Mr. Jeans had identified 16
areas to discuss with the committee.
Number 0244
EDDY JEANS, Manager, School Finance Section, Education Support
Services, Department of Education, said the first issue is the
terms "state support" and state share" are similar and therefore
confusing, so the department has recommended changes as follows:
Page 2, line 9, delete "funding", insert "aid"
Page 2, line 14, delete "state share", insert "basic need"
Page 2, line 17, delete "state funding", insert "basic need"
Page 2, line 22, delete "share and a", insert "aid, the
required"
Page 2, line 23, insert before determination, "and deductible
Impact Aid"
Page 2, line 24, delete "state share", insert "state aid"
Page 2, line 24, delete "state support", insert "basic aid"
Page 2, line 24, delete "a", insert "the required"
Page 2, line 25, delete "state support", insert "basic need"
Page 3, line 7, insert after, (2) the "required"
These recommended changes are to clarify the calculations of basic
need and state support. He said that other sections of the bill
may need to be amended for consistency.
Number 0376
MR. JEANS said the department's second issue is on page 3. Under
the current foundation law when a newly formed borough is created,
there's a transition period to the four mill required local effort
occurring over a three year period. The department suggests that
transition language, similar to the current law, be inserted in the
proposed bill.
MR. JEANS said the next item was on page 4, line 5, and the
department recommends "ADM" be deleted and insert "intensive
student count."
Number 0421
MR. JEANS explained page 4, lines 6 - 9 of the proposed legislation
requires districts to have on file with the department a plan of
service for special education, gifted and talented education,
vocational education, and bilingual service education. He pointed
out there are currently a number of school districts that do not
have at least one of these plans on file with the department.
Under the proposed language, if all three plans are not on file,
the district would not qualify for the 20 percent special needs
adjustment.
CHAIRMAN BUNDE assumed if a district doesn't have a gifted and
talented education plan on file, it means the district doesn't have
gifted and talented programs.
MR. JEANS verified that. For example, the Southeast Island School
District in Skagway doesn't have bilingual programs in place.
Number 0549
REPRESENTATIVE JOE GREEN inquired if the bilingual education was
the plan most often not on file or was it varied so a general
change couldn't be made to the language.
MR. JEANS said the department has listed the school districts that
do not have their plans on file; the two categories appear to be
gifted and talented, and bilingual. Currently, Aleutian Region,
Hydaburg, Mt. Edgecumbe and Tanana do not have gifted and talented
plans on file with the department. Mt. Edgecumbe, Skagway and
Southeast Island districts do not have bilingual education plans on
file.
Number 0592
CHAIRMAN BUNDE asked Mr. Jeans if his interpretation of the
proposed legislation was that the total 20 percent special needs
allocation could go to special education, bilingual or any
combination thereof.
MR. JEANS said his understanding is that it's an allocation for
special needs; it's discretionary funds.
Number 0627
MR. JEANS referred to page 5 and said under the current foundation
program, if a school district experiences a 10 percent loss in K-12
instructional units from one year to the next, there's a hold
harmless provision which softens the loss of revenue over a three
year period. There is no hold harmless provision in the proposed
legislation so when a district experiences a loss, it's immediate.
CHAIRMAN BUNDE noted he had just received a letter from
Superintendent Griffith, Southeast Island School District,
expressing concern about transition language for the purpose of
determining a school size factor and that students in small schools
and ten average daily membership (ADM) should be included in the
larger schools in the district.
MR. JEANS added he believed Superintendent Griffith was requesting
a one-year hold harmless for schools that fall below the threshold
of ten ADM.
Number 0720
CHAIRMAN BUNDE commented he thought Senator Wilken, in his
presentation of the bill at the previous meeting, had indicated
there was not a cutoff at ten students.
SENATOR GARY WILKEN responded it does cut off at ten. The proposed
bill does not recognize a school for less than ten ADM.
Number 0745
MR. CROSS said he would now discuss the school size factor. He
referred to the table on page 5, lines 10 - 18, and said this is
really the heart of this bill; it's an important and significant
departure from the way the current formula provides for fixed costs
or create a means to make sure that small schools have sufficient
resources to operate. He pointed out the table begins with a
student count in a school of at least 1 but less than 20, but the
transition language on page 21 clearly states that if a school has
10 ADM or less, it gets counted in the largest school in the
district. Therefore, it is the department's belief that 1 should
be changed to 10 in the table on page 5, to make it clear that a
school with less than 10 students would not participate in this
part of the table.
Number 0846
MR. CROSS said the second issue is on page 21, line 4, the
Department of Education has been given privilege of defining the
term "school". He wanted to point out how changes to that
definition could have significant influence on the amount of
revenue that schools will receive as applied to the table on page
5. The first observation about the table is that it's very
aggressive. He referred to page 5, line 15, and said, "You see
that schools of less than 250 are the only schools that receive an
adjusted ADM for each additional student that is greater than 1.0.
And that after 250 students, you start to lose adjusted ADMs by 3
percent in the first line, and then 8 percent and then 16 percent
if you're over 750." He said it's important to realize that
rather soon as a school starts to grow, the multiplier starts going
below 1.0 rather quickly. What that teaches us is that at some
point in time a school is actually going to have a lower adjusted
ADM than it does an ADM; the adjusted ADM will be lower than the
exact number of students. According to the department's
calculations, that starts to occur at 1,023 students. Under this
table, the adjusted ADMs for a high school of 1,500 or 1,600
students will be less than the actual number of students.
Number 0982
MR. CROSS said that is important to note because this legislation
provides $3,944 for every adjusted ADM plus other factors that are
added in depending on district cost factor. Adjusted ADMs are very
important; the more you have, the more you're going get. He
referred to the table on page 5 and said smaller schools do well in
the first part of the table; for example, a school with 20 students
receives nearly twice the adjusted ADM. He explained this comes
from the McDowell Study which is a departure from funding
communities to school level and it's important to understand why
the McDowell Group made that recommendation and on what set of
principals they thought it would work. The most significant
objection the McDowell Group had to funding communities was the
way funding communities are distributed in the state doesn't make
sense; in other words, they can't do an analysis of a funding
community structure and get any kind of normalized data. Because
of that, the McDowell Group abandoned funding communities; however,
their study recognizes there are some reasons to think that
funding communities might be a reasonable approach.
MR. CROSS further stated the McDowell Study states, "The funding
community concept clearly has merit; however, the advantages of the
concept may be more theoretical than real. And because one of the
advantages is obviously it would create a disincentive to have a
lot of really small schools because small schools do so well in
this table and you don't want to create an environment where you're
generating a lot of really small schools. And so funding
communities, properly applied, kind of fix that because they deal
with an area of where education is going on and if you have one
school, two schools or three schools, it really doesn't make any
difference, where clearly in this table it does."
MR. CROSS continued, "They say that funding communities aren't the
only safeguard against inefficiently sized school, that we have
control of construction - that meaning the department - and some
level of fiscal responsibility should be assumed. Also, if
adjustment factors are accurate - meaning this table - the
increased cost of operating small schools should be significant
enough where it really - even though you're getting more money, it
doesn't make any sense to go ahead and build them because it's
going to cost you that much more money in order to be able to
operate them. So, it was on that belief and on this statement, the
lack of a consistent definition of funding community was also a
factor in the decision to adopt schools as the revenue generating
units." The department understands that and in fact, believes the
study is important in that it's analyzing school costs, which is
really important; however, the department's problem is in the
application of this table.
Number 1188
MR. CROSS said the Department of Education has never collected
school enrollment data by school and verified it in an audit. The
reason is because the current foundation formula generates money
based on funding communities; therefore, the data collected by the
department is funding community level data. Actually, the only
school information the department has collected is for the purpose
of compiling the Alaska Education Directory, which simply states
where all the schools are in a district, the principal, and
information of that sort. This information has been self-reported
data. The only other data available in the department is facility
data for each district; some are schools, others are tank farms,
warehouses, et cetera.
Number 1247
MR. CROSS explained that current regulation defines school as a
program and doesn't give any guidelines in specifying what a
program is. A program of instruction could be an alternative
program, it could be a high school, it could be a middle school or
it could be many different structures. He said, "So that's looking
at it from how you teach the kid - to how you teach the kid
perspective as opposed to looking at the facility. The opposite
end of that would be to look at just if it's a facility, it's a
school and if it's a school, then it gets counted into the table."
Number 1292
MR. CROSS said in the first spreadsheets runs done for the Senate,
the department used the data primarily collected in the department
and is really the data reflected in producing the Alaska Education
Directory. Since this legislation has been in the public eye and
school districts have started their review, it hasn't taken them
long to figure out the definition of "school" will be incredibly
important. The districts are challenging the department's data in
terms in whether or not all the schools are being appropriately
reported. He's looked to find some practical applications of some
of the problems the department is experiencing in applying this
table. For example, Petersburg, as a district, does quite well
under the new formula table. The reason for that isn't because
their area cost differential changed; it was 1.0 before and it
remains 1.0 under the new table. The reason is that Petersburg is
a rather small community - 700+ students - but it has three
schools; an elementary school, a middle school and a high school.
So Petersburg can take those 700 students, split them into three
pieces and run them through the table three times. The same thing
would occur for the Wrangell which also has three schools. He
continued, "So I said let's do a comparison because remember what
McDowell was saying that these adjustment factors - any increased
costs should offset any difference in this table. So I went to my
old district because I know it pretty well, up in Fairbanks and I
looked at Ben Eielsen Junior/Senior High School, but Ben Eielsen
Junior/Senior High School has about 600 kids in it and it has two
wings; it has a wing that goes off to the junior high kids and it
has a wing that goes off for the senior high kids and it has three
administrators in it. It has a principal in it and it has two vice
principals and one of the vice principals assumes responsibility
for the junior high or middle school program. But there's 600 kids
getting run through this table once for that 600 kid junior high
program. When we go to Petersburg, we find that 500 kids -- a
little under 500 kids are being run through the table twice and the
question that you have to look at between those two schools is
there really increased costs in Petersburg that justify that
differential. So I was looking at our school facilities table and
I noticed that Petersburg had a project on our list and it was for
a roof for the junior/senior high school. So I said to myself, now
we have a community that is reporting that it has two schools, yet
they're asking for one roof for both, so I called Mary Francis, the
superintendent because I know her and obviously she's not up to any
shenanigans - this is a condition that's existed for years and
years down there. And in fact the facility in Petersburg is one
building; it is connected and there is a hallway in between and
what she explained to me is she has two principals - she has
separate principals for each side - and in fact they have different
colored carpet. The kids in the middle school are taught that they
can't go on the high school carpet and vis a versa because they
want to keep the grades separate."
Number 1495
MR. CROSS said the question now becomes is Fairbanks now going to
take the position to promote one of the vice principals to a
principal. They would have the very same argument that it's really
two separate programs and should therefore be run through the table
twice. A better way of putting it is not that there would be
advantage taken in this situation, but rather is this a legitimate
issue; is there really an increased cost in this situation where
the facilities are similar but one facility makes the decision to
have two principals while the other facility decides to have a
principal and two vice principals. He doesn't think the answer
justifies it. He said, "Let me tell you how big the number is. If
we took Petersburg and we took the position that that was one
facility and therefore, we're only going to run it through the
table once - it's $309,000 that that district would lose as a
result of that. And if you look at the size of the district and
the size of its budget, you'd see that $309,000 is not chunk change
to them. And by the same token if Fairbanks took the position that
they wanted to claim that Ben Eielsen Junior/Senior High School --
and just to complicate things, this year they're in a construction
period and they actually have their middle school kids in Taylor,
so there really is a separate facility -- and if they wanted to
take the position that that's two schools and they want them run
through the table twice, then they generate over $400,000
additional by being able to go through the table twice."
MR. CROSS said the department argues strongly with McDowell's
conclusion that the funding community concept has merit, but it's
only theoretical; it's anything but theoretical and going to the
school size table is posing some real serious problems.
Number 1589
MR. CROSS remarked one other thing is the legislature is interested
in having school districts adopt prototypical schools and create
more efficient size. If Petersburg was going to replace their
schools in the future, perhaps the best and most efficient solution
would be to replace their school with a prototypical school divided
into wings, with one roof, one boiler et cetera. However, the
impact of that for Petersburg is enormous. They're a winner now,
but would become a significant loser if all of a sudden the
district's construction program came into one school as opposed to
the three.
Number 1640
CHAIRMAN BUNDE said one of the most often heard criticisms from the
smaller schools is that the urban areas have an economy of scale,
so there should be less money per student. He asked if Mr. Cross
was arguing against that.
MR. CROSS replied no. He understands the argument and he's not
arguing there wouldn't be an economy of scale in a larger school;
there is an economy of scale in a larger school. The question he
was trying to raise is does the table in the proposed legislation
appropriately address it. In his opinion, the answer is clearly
no.
MR. CROSS said another issue the department has dealt with in
coming up with a definition of "school" is the department is now
getting calls from superintendents saying a couple of different
things. First, they've got two schools connected by a covered
walkway and they are perfectly willing to tear the walkway down and
create two schools. The other is the number of programs in this
state that may fall into a definition of school, but really don't
have the cost that McDowell analyzed in developing the table.
Those are programs such as teaching 17 or 18 kids in a jail or
teaching kids in Charter North. He said, "And is it kind of an
appropriate structure and appropriate task to perform to go ahead
and say that those are schools and they ought to be run through the
school size table and if you've got less than 20 of them you ought
to get 39.6 kids."
Number 1731
CHAIRMAN BUNDE pointed out that kids in state custody are paid for
by the state and are certainly not going to be considered in
school.
MR. CROSS countered that is one of the things the department has
been struggling with over the last few days because districts are
assuming those programs absolutely are schools and must be run
through the table.
CHAIRMAN BUNDE noted the legislature would certainly give the
districts strong guidance in the determination as to whether those
programs are schools or not.
MR. CROSS said the department will certainly appreciate guidance in
defining a school but for the committee's information the
department spreadsheets have taken a situation like the 19 or 20
kids in Charter North, treated them as a school and ran them
through the table as a school. He had been curious what the impact
would be if those programs were defined as auxiliary programs and
the kids were included in the school count in their attendance
area. He said, "And therefore they didn't run through the table --
we counted the kids but we didn't count them in that program -- we
counted them in the table in accordance with the school that they
would attend where they resided in Anchorage. Do you know what the
difference would be for Anchorage if we did that? Three million
dollars - Anchorage would lose $3 million if we took that
definition." The point is it would make a very significant
difference in terms of the amount of revenue.
Number 1822
REPRESENTATIVE GREEN said, "You have talked about this $300,000 or
$400,000 swing and if I look at the multipliers here between say a
750 or 2 schools that would make that up, you're going from a 0.97
to 0.92 - 5 percent. Am I right then that you're talking about
$300,000 or $400,000 out of a $2 million or more ...."
MR. CROSS said no, the table is loaded at the front end.
REPRESENTATIVE GREEN said, "If I go from somewhere -- from line 16
to line 17, if I understand you're between one or two schools and
750 student population, you're bouncing between those two lines and
the multiplier difference between the 400 that you have on line 16
and the 750 in a single school would be 5 percent, but up to that
point, it's 400. I mean, it's the same -- it's the .97."
MR. CROSS thought it would be a lot more aggressive than 5 percent,
but he'd have to actually sit down and figure it out.
REPRESENTATIVE GREEN stated, "Well, if I was on line 16 -- we've
got two schools now -- I'm going to be somewhere on -- two schools
within that line 16 -- in a 750 school population."
MR. CROSS responded if there's a 750 student school, both schools
would fall within line 16.
REPRESENTATIVE GREEN said if he understands correctly, it's 0.97
times 250 on up to 400 and then anything beyond that for a single
school would drop to 0.92 for the same population of students.
MR. CROSS noted that what Representative Green said was right, but
what actually happens is the kids between 375 and 450 go back down
to the bottom of the table and go through the table again; so they
go through line 11, line 12, line 13. It isn't the difference
between 0.97 and 0.92, it's much more than 5 percent.
REPRESENTATIVE GREEN asked what the percentage would be.
MR. CROSS said he would have to calculate it.
REPRESENTATIVE GREEN commented the number may not be so significant
when looking at the total budget for the school.
MR. CROSS said in the case of Petersburg, for example, with a total
budget of $3.8 million, a $300,000 drop in funding is significant.
He added, "Right now Petersburg is showing a gain of $600,000 which
is 19.93 percent, so you take half of that out of it, and that's 10
percent of their district budget, not that school's budget."
Number 1989
CHAIRMAN BUNDE surmised the cutoff at 250 school population would
be approximately half the schools in Alaska.
MR. CROSS said he believed that was correct.
Number 2007
MR. CROSS said he would next like to address the district cost
factor. The proposed legislation requires the department to adjust
district cost factors by the Anchorage Consumer Price Index (CPI)
and submit proposed district cost factors to the legislature every
other year. The transition language states the first time this has
to be done is in the year 2001. The McDowell Study in the
executive summary states, "Our recommendation is to compensate
districts for their actual costs incurred. This is an
unsatisfactory run solution, but basing the district cost factors
is an improvement over the current method." As an aside, he
pointed out it would be the area cost differentials instead of the
district cost factors because the McDowell Study is different from
the proposed legislation. He said basically these cost factors are
a representation of what districts are spending, not what they
should spend and the McDowell Study says, "You ought to do
something about that prospectively - you know you really ought
start to get things put together." The department, in preparing
for this testimony, didn't know what to do with this, so they
called David Teal at the McDowell Group and said basically someone
must have errored by stating the district cost factors were to be
adjusted based on the Anchorage CPI; the Anchorage CPI has nothing
to do with the cost factors - these factors are differentials and
if adjustments were going to be made for inflation, it should
probably be done in the per student allocation. The department
asked Mr. Teal if he agreed with that and his response was
absolutely, the Anchorage CPI has nothing to do with adjusting
these factors prospectively. When Mr. Cross asked how the
department should do that, Mr. Teal responded you can't: You can't
use methodology that we used to determine these factors two years
from now in order to come up with additional cost factors. Mr.
Cross said the McDowell Group used reverse engineering to develop
the cost factors and two years from now there won't be anything to
reverse engineer it to and therefore, as Mr. Teal had indicated,
the department couldn't use McDowell's methodology two years from
now to adjust these numbers. The McDowell Group had no suggestions
when asked what to do in adjusting these cost factors. He said, "I
want to leave that by saying that their recommendation is that it
is very important -- I mean, we have to understand that these are
based on how people are spending their money right now; not how
they should be spending their money, and therefore, to leave these
things in here in perpetuity would be inappropriate and contrary to
what the study recommends. And so the only issue we're leaving
with you here is we have not been given any advice from the people
who developed these factors of how we will update them and they
have told us we couldn't do it the way that they did it."
Number 2174
MR. JEANS continued explaining the department's next technical
issue on page 9, line 2, which sets the minimum expenditure for
instruction. Most districts cannot meet this requirement; only
school districts with large student populations and large schools
can meet this requirement and that's because those costs are spread
over such a large population. He understands the bill includes an
appeal provision.
CHAIRMAN BUNDE verified that Mr. Jeans was addressing the
requirement that a minimum of 70 percent be spent on the
instructional unit after the transition period and because it costs
more to heat a building in rural Alaska, the department is
contending it can't be done.
MR. JEANS said that school districts that have small schools will
have a very difficult time meeting this requirement because there
are fewer students to spread the fixed costs across.
Number 2240
REPRESENTATIVE TOM BRICE expressed his concern about districts with
smaller schools meeting the 70 percent requirement and inquired
what the department's expectation was on requests for waivers.
MR. CROSS said the department knows there are only about five
districts in the state that would meet the 70 percent requirement.
He added the department has some questions about the definition
used in the bill, because it can't be tied to anything in the
department's chart of accounts. He said, "Let's assume and concede
that there does need to be administrative efficiencies - that there
may be ways to save some money out there - so let's say you get
your number up to 10 or 12 but because of the increased cost per
student you know, there will be quite a number of districts that
are going to have to be applying for the waiver every year."
MR. JEANS pointed out in the past there had been a minimum
expenditure requirement on instruction; it was set at 55 percent.
The North Slope Borough could not meet that on an annual basis, so
their waiver was prepared for them in advance.
CHAIRMAN BUNDE wanted to clarify that the department supports
spending the majority of educational funds on children, not on
administrative costs.
MR. CROSS responded absolutely. The goal of any district should be
to direct as much of its resources as possible to the
teaching/learning environment, to the classroom, to communication
between the parent and the classroom.
TAPE 98-33, SIDE B
Number 0001
MR. CROSS continued " ... to the extent that districts aren't doing
that and there are good business practices that could enable them
to direct more money in that direction and there are efficiencies
that could be created where they could decrease administrative
costs, build more efficient schools to take less of their money out
of the light and heat, of course they ought to be doing that."
CHAIRMAN BUNDE said he thought those operation costs could be
separated out.
MR. CROSS commented he had been reviewing data from the state of
Texas, which has the second largest number of school children, and
statewide 51 percent of their expenditure is in instruction. The
question is do we want a target so aggressive that no district will
be able to meet it.
REPRESENTATIVE PORTER asked assuming there are efficiencies to be
had throughout the state on administrative costs, isn't it a step
in the right direction perhaps with some refinement, to establish
a percentage that's higher than it is now and then going school-by-
school for allotment rather than by community.
MR. CROSS said based on the way this is set up, it's more than
trying to improve efficiency in administrative costs. He said the
McDowell Study illustrates what the range of administrative cost is
in current expenditures and no amount of good business practices or
increased efficiency is going to save enough to redirect that
resource into a classroom.
Number 0099
MR. JEANS said the next issue on page 9, line 30, definition of
"instructional component", is a continuation of the issue
previously discussed. The definition of "instructional component"
includes expenditures for teachers and for pupil support services.
He noted the department has had problems administering this
definition because it does not conform to the chart of accounts.
Pupil support services is a function identified in the chart of
accounts and he assumed the phrase "includes expenditures for
teachers" meant the instructional component; regular instruction,
bilingual, special ed, vocational education and all costs
associated with providing those services. This definition,
however, is very narrow.
Number 0148
MR. JEANS referred to the next issue on page 12, line 4, and said
the department recommends a definition be included for "eligible
Impact Aid." The current foundation formula has a definition for
eligible Impact Aid and he is in the process of updating the
terminology.
Number 0170
MR. JEANS said the next item pertains to page 17, lines 6 - 12,
Funding for Special Education Service Agency (SESA). This section
cannot be applied as CSSB 36(FIN)am is currently written. The
funding formula no longer requires that special education students
be identified nor does it make a specific allocation for special
education. He noted the statute for allocating the funds is $85
per child or 2 percent of the special education funds.
Number 0195
REPRESENTATIVE GREEN inquired if there was a change that could be
accomplished to provide for that. He asked if it could be done as
it's written in the proposed legislation or would it require
additional work somewhere else; i.e., some other accounting
procedure.
MR. JEANS responded there are any number of changes that could be
done to accomplish that. He added, "This language was developed
and applied to the current foundation formula where we identify
students - we have a separate allocation for special education.
This language needs to be amended to come up with a new formula for
determining what the allocation will be for SESA."
Number 0234
SENATOR WILKEN acknowledged the language needs to be added and his
office will be working with the department to develop that
language.
MR. JEANS said Mr. Cross would address the next issue, the
requirement to employ a chief school administrator.
Number 0262
MR. CROSS said page 14, line 14, addresses whether or not a school
district has to have a chief school administrator which means under
current statute, a licensed superintendent. First he wanted to
clarify the comment made at the previous hearing that it made no
sense for the Aleutian Region Rural Education Attendance Area
(REAA) to have a superintendent because of their small size. He
said the Aleutian Regional REAA, in fact, does not have a
superintendent; their superintendent services are contracted with
Unalaska. So they do have a superintendent, a licensed
administrator, but they contract with another district for that
service. Also, there had been some frustration expressed at the
previous meeting with the situation in Adak. He appreciated
Representative Brice's accolades to the commissioner for doing
something about the situation and he wanted to discuss just what it
was she did. She filed a complaint for that administrator with the
Professional Teaching Practices Commission (PTPC), and eventually
entered into an agreement whereby the administrator's license was
revoked. He noted complaints to that commission are restricted to
certificated administrators.
MR. CROSS said that if provisions in the proposed legislation with
respect to removing the requirement to employ a chief school
administrator were to become law, turning a certificated
administrator into the PTPC would have no effect. The PTPC could
revoke the license but there would be nothing to bar the person
from continuing to serve as the chief operating officer because
this language eliminates the only requirement for any kind of
licensure for the chief school official. He said the PTPC is the
only avenue available; the police and the courts aren't too
interested in pursuing these issues because the amount of effort it
takes to resolve it exceeds the efficiency factor. In the Adak
situation, the department went to the state police and other
agencies seeking assistance, and while there was sympathy, the
amount of effort required was more than they were willing to
provide. So really, the department had only the PTPC to fall back
on. If the district's chief school official is not required to be
licensed, there is very little the state could do about misconduct.
CHAIRMAN BUNDE inquired if the department was able to withholding
funding to a district.
MR. CROSS responded he would be willing to discuss this issue at
great length, but in the Adak case, the only thing the department
had was to go after the license. The department had been advised
by legal counsel that funds could not be withheld, et cetera.
Number 0430
CHAIRMAN BUNDE understood the proposed legislation changes the
proviso that a district "shall" have a chief school administrator
to "may" have one and doesn't say anything about whether the person
is no longer licensed.
MR. CROSS said if the person loses their license, it has no
consequence because there's no requirement that a district have a
licensed administrator as its chief officer.
Number 0447
SENATOR WILKEN commented that Fairbanks is in the process of hiring
a superintendent and thinking perhaps of going outside the ranks
and hiring someone who wouldn't have a certificate. He offered to
work with the department on this issue.
Number 0470
MR. CROSS commented he would next like to explain the three sets of
spreadsheets prepared by the department which represent the three
years of implementation of the proposed legislation. He pointed
out these spreadsheets are different from the last set, even though
the bill hasn't changed. The most significant percentage impact is
in the Southeast Island District which now shows a loss of $17,000
or 17 percent and on the previous spreadsheet showed a gain. He
said the department made an error - there are four schools in the
Southeast Island District that have a student count of less than 10
and were run through the table instead of including them in the
largest school in the district and the result is a very significant
swing for that district. There were other schools the department
erroneously ran through the table, correspondence students were
included in the school count rather than separating them out, and
other errors that needed to be cleaned up. He said the department
is in the process of trying to define a "school."
CHAIRMAN BUNDE asked how schools were defined in terms of the
spreadsheet.
MR. CROSS said for purposes of the spreadsheet, schools were
defined as self-reported data. In other words, the information
reported by the districts is what was used.
CHAIRMAN BUNDE inquired if Charter North and/or McLaughlin Youth
Center had been defined as a school.
MR. CROSS said yes; it was listed in the data provided to the
department by the Anchorage School District. He said the
department would furnish the committee with what information was
and wasn't run through the spreadsheet. He reiterated that as the
term "school" is defined, either together or independently, there
will be substantial changes to the spreadsheets. He emphasized it
is the department's opinion that the table in the proposed
legislation is not the way to do it and there is not a definition
of school that can be arrived at that won't be able to be taken
advantage of. He believed the McDowell Study was wrong, not
necessarily in the methodology, but in the conclusion that this
school table was a practical way to go. He was of the opinion that
some sort of funding community will have to be the solution.
Number 0669
CHAIRMAN BUNDE observed the vast majority of the districts that
would lose money under the proposed table have no local
contribution and if there was a local contribution, they wouldn't
be losing that amount of money.
MR. CROSS replied, "If they made a local contribution in order for
them -- and it was based on some kind of four mill equivalency, in
order for them to get more money, they would have to contribute
more than that because you would take that away from them in their
state aid and if they were an REAA -- we went through this in the
Senate -- if they're an REAA, you have to give it back them, but
it's the zero sum game. What they get back is what their share of
what gets put on the table because they're making a local effort,
if that's making any sense. And to use an example, when we apply
the table to the situation in Anchorage, it would be about $3
million, actually it's $3.6 million. But that puts $3.6 million on
the table; Anchorage gets some of that back, so that drops the
actual loss to them probably to around $3 million. When you
require an REAA to have a local contribution of a four mill
equivalency, it gets nothing for that; it stays even. What happens
is that they get some money because there's more money on the table
to distribute through the state dollars."
Number 0748
REPRESENTATIVE BRICE observed that an ideal size of a charter
school would be 29 students.
MR. CROSS responded that charter schools are an interesting issue
because the department's interpretation of the law is that charter
schools must be treated as a school and therefore, in any
definition of school that's reached, of course law is more
important than regulation and therefore, that definition will be
controlling. So whether a charter school is housed in a school
facility such as a high school, the department believes the current
definition of a charter school will require that it be treated as
a school and run through the table, even if it's a correspondence
school.
MR. CROSS said in conclusion, the department strongly opposes CSSB
36(FIN)am. The department believes the distribution of wealth in
this legislation leaves school districts without the capacity to
continue the education program and without respect to the rhetoric
and debate, gives them no ability to make up the loss. He
commented there were many things discussed on Saturday that had
nothing to do with this legislation, which is why the department
wanted to explain line-by-line what this bill does, not what some
other theoretical construct does, and the department believes this
bill denies 20,000 school children in the state and keeps them from
getting a fair opportunity to get an education. He concluded the
Governor has said he would veto this bill in its current form.
Number 0859
REPRESENTATIVE BRICE understood the department has a list of
schools that are under average or having problems and he wondered
if the department had done a comparison of that information with
the departmental spreadsheets.
MR. CROSS advised those lists were put out as part of the federal
Title 1 requirements and do identify certain schools that aren't
performing, but a correlation of the impact of this bill has not
been done. He pointed out those statistics are important, but are
misleading because they leave the impression that students in the
schools not falling within that definition are doing well, which is
not the case. Problems are easy to identify in small schools
whereas in large schools, kids just get lost in the statistics.
Number 0925
SENATE WILKEN thanked Mr. Cross and Mr. Jeans for their
constructive comments.
Number 1006
REPRESENTATIVE BRICE asked if any discussion had taken place with
the Department of Community and Regional Affairs relating to
consistent application of property value assessments across the
state.
CHAIRMAN BUNDE was not aware of any discussions. He asked Eric
McDowell and David Teal to come forward to the witness table.
CHAIRMAN BUNDE said inasmuch as the area cost differential study
has not been viewed with great favor in some areas of the state,
Mr. McDowell and Mr. Teal would have an opportunity to defend the
validity of the study. He pointed out the McDowell Group had been
hired by Legislative Budget and Audit.
Number 1310
ERIC MCDOWELL, Senior Partner, McDowell Group, commented the
McDowell Group has been in business for 25 years, done many studies
and stay in business because they are objective and down the
middle. He said all the questions presented are good questions and
they wrestled endlessly with all the questions that came up today.
First, he felt it was important to clarify the role of the school
cost study in the universe of school funding. The study is a
piece, but it's not everything. It deals with what the cost
implications were of school size and of geographic location in
Alaska. Federal aid, local contributions, and things of that
nature were outside the work of the McDowell Group; the only
relationship between the work of the group and this legislation is
that numbers were set out for school size and geographic location.
The policy issues in terms of special education, local contribution
wrestled with by the legislature are outside the perimeters of the
study. This gave him a chance to make a comparison because 13
years ago, the group completed a cost of living study for
communities around the state. Unfortunately, that study was used
as a proxy for the cost of funding a school, which in most cases
are unrelated. He said this time the group had the opportunity,
for the first time since statehood, to do a study on what it
actually costs to operate the schools. That is the basis of the
group's work and he believes it's a vast improvement over what has
been in place for the last 13 years.
Number 1217
REPRESENTATIVE GREEN asked Mr. McDowell to comment on the earlier
remarks that the formula couldn't be duplicated or updated because
of reverse engineering.
MR. MCDOWELL said that leads into what he considers some of the
most important questions that came up. Basically, there are three
large components of school costs. First is instructional and he
defends the school size curve; it's both statistically validated by
the work done by the McDowell Group and by the team of four school
experts with 100 years cumulative experience. That curve which
determines essentially most of the cost of education in Alaska is
a very good one. Second is the administrative component. He noted
the Department of Education had very good data on staffing by
school and a lot of that data was used in the study. On the other
hand, the administration piece has definition problems which the
group wrestled with and "is administration $500 or $5,000 per kid,
who knows?" The third component is the nonpersonnel costs; i.e.,
fuel used for heating the building, et cetera. A review of the
data revealed a variation among districts in terms of
administration costs to such a degree that a good, sound curve
couldn't be developed. He said, "So that's where we said okay, for
now let's say you get what you're spending in that area and the
same with nonpersonnel costs where the variation was quite wide as
well." The study recommends more detailed reporting from the
districts about administration and nonpersonnel costs, with better
definitions. If the department were to receive data in that way,
two years from now typical curves for school districts could start
being plotted. For now, however, the group was unable to develop
a good, sound curve. In terms of reverse engineering, he wasn't
sure what was meant by that, but they did a very simple exercise on
administrative and nonpersonnel costs which was "here's the per
student amount that you're spending, you get that; you're not
penalized." He said that one of the important findings of the
study is that in a lot of rural areas, the nonpersonnel costs are
higher than the old formula permitted and the area cost factor
compensates for that.
Number 1377
DAVID TEAL, Senior Analyst, McDowell Group, said, "I guess in
response to the department's issue that we can't duplicate the
methodology, that's the final methodology - the reverse engineering
- because we looked at it in three pieces and because the Senators
who put the bill together wanted simplification and it was very
clear that three pieces and requirements to put things - divide
things first - was not simplification and (indisc.) please put
these back together. That process of putting things back together
really amounts to saying, well we know what this detailed analysis
gave us, so we know what the answer is. Now if you want to slam
them all together, you're going to lose that detail and all we're
doing is taking where we are and where we need to be and saying,
you need to multiply by this number to get there. So, the
methodology cannot be used by DOE; they will have to repeat this
process. They can't just go to the chart of accounts, grab some
new numbers and plug it into the formula. They're going to have to
say, what are these pieces, let's define these things, let's draw
curves, let's redo this administrative study; not simply take two
days and plug something in. I guess what I'm saying there is if
you want DOE to redo this study, it's not a matter of a two-day
process; it's almost going to be a full-time job to have someone
there defining and monitoring expenditures by the districts -
internal auditors or whatever they are, but in a friendly sense -
and actually having to redo this study on an ongoing basis. I
don't think the right way to do it is to suddenly jump at it."
Number 1499
REPRESENTATIVE PORTER asked if it was a function of perhaps not
having the appropriate data listed on the chart of accounts.
MR. TEAL said the data are complete and accurate; the problem is
consistency. For example, a superintendent in a small school
district may be both superintendent and principal and in one
district he will charge in the chart of accounts as a full-time
superintendent and in another district, may charge himself 75
percent to principal and 25 percent to central office
administration. Principals go under instructional costs and
superintendents go under district costs, so the data is garbage.
It's difficult to tell if the books are being kept consistently
without going back to individual districts and reviewing
information.
REPRESENTATIVE PORTER said he had been speaking more in terms of
some consistent standard for reporting.
MR. TEAL responded yes, and that's what he's viewing as the full-
time job; defining what's wanted in the chart of accounts and
making sure the districts follow it consistently.
Number 1685
MR. MCDOWELL said he and Mr. Teal were not implying the district's
reporting isn't good, because all the statements are audited. The
question arises when the data is categorized as to whether there's
consistency in the categorizing. If there's consistency in the
categorizing, then the curve can begin to be developed and get a
better understanding of why fuel costs $8 per student in some
districts and $.50 per student in others.
Number 1695
CHAIRMAN BUNDE asked Mr. McDowell to comment on the use of the
Anchorage CPI to adjust district cost factors.
MR. MCDOWELL said it's important to understand the CPI is a measure
of inflation; it doesn't measure the difference in cost between
Nome and Anchorage; it says that inflation went up 2 percent this
year in Anchorage. Assuming that's true for all Alaska, then 2
percent is added to the budget to cover inflation.
CHAIRMAN BUNDE remarked the current formula is not inflation
proofed, and there's no reason an inflation proof factor would need
to be written in this legislation; it could be adjusted by adding
more money when available, without taking inflation into account.
Number 1717
REPRESENTATIVE FRED DYSON said, "I was told that in the midst of
your calculations that, in essence, instead of considering
Anchorage costs as unity, you ended up deciding that Anchorage
costs were .85 of unity and then going back and making Anchorage
1.0 and then upping everybody else." He asked Mr. McDowell to
comment.
MR. MCDOWELL said it doesn't matter where the starting point is;
it's the relationship between all the districts that matters. The
starting place of 1.00 doesn't mean anything, but the accuracy in
the relationships between districts is what's important.
MR. TEAL added, "In the draft, when we did not, what I would say
normalize it, make Anchorage 1.0 or make the lowest cost district
1.0, Jerry Burnett who is the project director said, 'You're going
to change that though aren't you because no one will understand it
unless it starts at 1.0 because it's going to be real different and
confusing. So I guess it's confusing whatever way it's presented,
but I think that setting those lower districts to 1.0 is less
confusing."
Number 1852
REPRESENTATIVE DYSON asked if he had heard the average costs for
all the districts was 1.0?
MR. MCDOWELL said it was done that way in the first draft, and it
was suggested it be done the way people are used to seeing it,
which is the way it was done in the final.
MR. TEAL interjected that it doesn't change the results.
REPRESENTATIVE DYSON asked for an explanation on the major
components that had the Lower Kuskokwim and Lake and Penn Districts
appear as though they were getting disproportionately high amounts
of money from the foundation formula before.
MR. MCDOWELL said, "First of all, we don't make any judgments about
if anybody had too much or anybody had too little; as far as we're
concerned there wasn't anyone that was getting too much because
education is such an important issue. The part of the change in
their allocation that had to do with our study was a lot smaller
than what ultimately came out in the bill. Because again this is
where our study did one thing - I think it might have been 11
percent or something in those districts - whereas the other
programs that were policy decisions on the part of the bill
drafters and what related to our study had enormous impacts. For
example, in one of those districts I think nearly half of their
funding was from special programs - bilingual - and so something
like a 20 percent rule which wasn't related to our study at all
would have a dramatic effect. Local contribution would have a
dramatic effect and all the policy type legislation not related to
the McDowell Study had the largest impact on the potential losses
that those districts experienced."
Number 1987
REPRESENTATIVE DYSON asked if he understood correctly that the
results of the McDowell research had an 11 percent or less impact
on the distribution of funds under SB 36.
MR. MCDOWELL said overall their recommendations ended up with a
redistribution of $16 million among districts.
Number 2036
MR. TEAL said, "Specifically, the districts that have every school
as a funding community, and many of the rural districts are like
that, end up losing and they do lose 11 percent and that's because
of the way we count, as Rick Cross mentioned, you know, you run
them through the formula again -- well, in every district in which
a funding community and a school are the same thing, they weren't
affected by this formula. But when you get to communities -- all
of Southeast and particularly Anchorage and Fairbanks, where for
Anchorage, for instance, there's three funding communities, and one
of them has roughly 40,000 students in it. Those 40,000 students
in a single funding community are now treated as 80 different
schools and instead of coming up with a count of roughly 40,000
they come up with a count of 46,000 or something like that. So,
what you end up with is a whole lot more adjusted students and
that's the way the money is allocated - it's based on the adjusted
student count not the real student count. So, the count in the
rural districts stayed the same, but the count in the urban and
Southeast districts went up because of the way we were counting -
by school instead of funding community - leaving a smaller share.
If you had added more money in there - 11 percent more money - to
account for the different way of counting, then everyone would have
come out even, but the rule was here that we're to reallocate
money, not to determine the amount that's needed."
Number 2190
REPRESENTATIVE DYSON said he was confused about how 40,000 students
becomes 47,000 students.
MR. MCDOWELL replied, "Let's take the example, we're talking about
the curve for school size - just small schools are inefficient, you
need more teachers per kid and so forth - no question about it. So
you saw on the scale there where if you have 20 kids in your
school, you get credit for 39.6, but if you have 250 kids in your
school, you only get credit for 250 kids. What happened was when
we recommended the shift from funding community to schools, you
already had a lot of districts that were getting credit for every
school - if I have a little school over here and a little school
over here - chances are you're already getting credit for each of
those schools rather than being forced to combine them together -
call that a funding community and you only get to count once, so
your count is lower. What happened is now everyone, including the
communities that had to throw their schools together even though
they were operating several of them, are now given credit for the
extra cost of operating schools of different sizes. That's where
most of cost suffering in our work came from; it wasn't so much in
the actual cost of operating schools, although some of it was. But
a lot of it had to do with shifting because of that. So now
everybody's on an equal basis; if you've got a school you get
counted for it."
TAPE 98-34, SIDE A
Number 0001
REPRESENTATIVE KEMPLEN referred to the section on minimum
expenditure for instruction and asked if Mr. McDowell felt, based
on the analysis completed by the McDowell Group, the 70 percent
figure was achievable.
Number 0086
MR. MCDOWELL replied, "Mr. Chairman, that's an excellent case in
point about the difference between our cost study and SB 36; they
are two different things. Our cost study identified the proportion
of every district's budget that would be spent on instruction and
that varied anywhere from 50 percent to 91, I think in the highest
district - great variation. Another finding in the study is in
rural areas, it really does cost a lot to heat a building and you
don't have some very good buildings and a lot of maintenance and so
forth. And so clearly there's areas where the nonpersonnel costs
are very high. And that was our finding and we didn't make any
recommendations as all districts should do "x" as far as some
proportion. That is a policy decision that apparently the bill
writers settled on and wanted to shoot for a target of 70 percent.
I think that the motive for that appeared to be an effort to cap
administration because clearly administration costs were real high
in some places and low in others, and my guess is that's what that
part of the bill is related to. It wasn't related to our study;
our study simply found that statewide, on average, about 70 percent
of all the school costs are instructional, but that district to
district depending on circumstances and district policies and so
forth, it varies enormously from 50 to 90 some percent. We made no
recommendation in that regard."
Number 0195
REPRESENTATIVE KEMPLEN commented that based on the McDowell Study
the instructional costs vary significantly across the state and the
70 percent is an arbitrary number not based upon any quantitative,
analytical work produced by the McDowell Study.
MR. MCDOWELL said the only relationship is the overall average for
the state is now 70 percent and based on the language of the
proposed legislation, the conclusion is to have all districts
aspire to at least the average. He thought districts would have a
difficult time meeting the 70 percent.
Number 0269
CHAIRMAN BUNDE thanked Mr. McDowell and Mr. Teal for their
comments. He announced there were a couple of amendments he would
like to address.
Number 0289
CHAIRMAN BUNDE explained that Amendment 1 speaks to having one
counting period per calendar year. Currently, the legislation
allows for two counting periods. It does cost the districts money
to conduct these counts and when the count goes up, the district
submits it to the department for additional funding creating a
double dipping situation, and if the count goes down, the district
does nothing about it. Amendment 1 changes the legislation to one
accounting period and funding would be based on that single
counting period.
Number 0343
REPRESENTATIVE PORTER made a motion to move Amendment 1 which
reads:
Page 10, lines 7 - 9:
Delete "If it makes the district eligible for more state
aid under the program, a district may transmit, within
two weeks after the 20-school-day period ending the
second Friday in February, a similar report for that
counting period."
Page 10, line 18:
Delete "periods"
Insert "period"
CHAIRMAN BUNDE asked if there were objections. There being none,
Amendment 1 was adopted.
Number 0375
CHAIRMAN BUNDE explained Amendment 2 reinstates the 3 percent
employment tax to provide a local contribution for schools which
was deleted by the Senate Finance Committee.
Number 0410
REPRESENTATIVE PORTER made a motion to move Amendment 2.
Number 0413
REPRESENTATIVE KEMPLEN objected. He'd like to have a better
understanding of the impact of the amendment. His understanding
is, based on correspondence received in his office, there's not
very much employment in the unorganized boroughs in many parts of
the state. By the very nature of it being a rural area, there is
opportunity for economic development and to a great extent, those
areas rely heavily upon a subsistence based lifestyle. He
questioned whether a 3 percent employment tax in the unorganized
borough would produce a local contribution sufficient to meet the
requirement.
CHAIRMAN BUNDE responded if there isn't a great deal of employment
in the area, the contribution would not be that great. However,
the Department of Labor's study in 1996 shows $460 million in
earned income in the REAAs in rural Alaska, which is a significant
amount. In fact, it comes out to be an average of about $26,000
per year; the statewide average is $27,000 per year. He said there
may be more of an economic opportunity in rural Alaska than most
people realize.
Number 0614
REPRESENTATIVE GREEN asked if there was some reason to change from
allowing the unorganized boroughs as much flexibility to determine
how the local contribution should be garnered to a requirement that
unorganized boroughs impose this 3 percent employment tax.
CHAIRMAN BUNDE noted that unorganized boroughs do not have the
right for any tax and the legislature sits as the assembly for the
unorganized boroughs. Another layer of government would have to be
imposed on them so they could institute some other kind of tax or
the legislature could choose some other form of contribution. The
3 percent employment tax seems to be the easiest and probably the
most fair.
Number 0730
REPRESENTATIVE DYSON referred to page 2 of the amendment,
Determination of business situs, and asked if it is the intent of
this paragraph to place a payroll tax on anybody who works any day
in the unorganized borough.
CHAIRMAN BUNDE said that employers have to do quarterly reports, so
it may be a little more challenging in that a record would have to
be kept of how many days a person worked in the organized area
versus how many days in an unorganized area. He didn't have
information on how many people would be impacted and how big of a
problem it may be.
Number 0815
REPRESENTATIVE DYSON said his interpretation was that it's not only
how many days worked in an unorganized area, but which unorganized
area.
CHAIRMAN BUNDE replied, "As long as it's an REAA."
Number 0839
REPRESENTATIVE KEMPLEN said Anchorage is a service center for the
state and many of the engineering and architectural firms do a lot
of work for the rural areas; e.g., design and engineering for
schools, buildings, commercial facilities, et cetera. He wondered
if, for example an architectural firm gets a contract for work in
an REAA area, would that firm be required to pay a 3 percent tax on
the compensation derived from that REAA.
CHAIRMAN BUNDE said the next section of the amendment states the
firm would get credit if its already making a contribution toward
schools.
REPRESENTATIVE KEMPLEN said that was just for the amount of taxes
paid in their particular area. It appeared to him the credit would
only be as high as the local property tax.
Number 0946
CHAIRMAN BUNDE noted as the average in Anchorage is 9 mills, it's
very likely the majority of that 3 percent would be covered;
however, if an individual is extremely high salaried, perhaps it
wouldn't be and the excess would go to the general fund to be used
for schools.
Number 0972
REPRESENTATIVE KEMPLEN inquired if it was possible that an
Anchorage resident could end up paying taxes for both the Anchorage
School District and a rural school district.
CHAIRMAN BUNDE said he needed to look at the issue more closely.
He called Jerry Burnett forward to the witness stand to explain the
issue.
Number 1027
JERRY BURNETT, Legislative Assistant to Senator Randy Phillips,
Alaska State Legislature, said "If I read this amendment correctly
and if it's the same as the bill was before, then the tax credit is
the amount paid - it's a credit for the amount you paid and so, you
could in fact, end up - the way this is written - paying taxes
(indisc.) an REAA. And to further clarify there was someone else
on the bookkeeping side that Representative Dyson asked a question,
yes, they have to separately account by which REAA you're working
in because it does require the Department of Labor and the state to
deposit the money separately in an account for each REAA."
Number 1078
REPRESENTATIVE BRICE asked how this would impact renters.
MR. BURNETT said as written, a renter who worked in the REAA and
lived in Fairbanks, would pay an employment tax in the REAA; there
is no provision for a credit to that rent.
Number 1109
CHAIRMAN BUNDE added that all those who live out of state would be
paying in this particular case.
Number 1131
REPRESENTATIVE BRICE cited an example of an electrical worker from
Seattle working in an REAA who was paying school tax in Washington.
The amendment doesn't necessarily state that he can't use that as
a credit.
CHAIRMAN BUNDE said he was hesitant to respond without further
review. He inquired if the committee needed further perusal of the
amendment.
REPRESENTATIVE BRICE requested that Amendment 2 be held for further
discussion. There was no objection from other committee members.
CHAIRMAN BUNDE announced CSSB 36(FIN)(title am) would be heard
again in committee on Wednesday, April 1.
ADJOURNMENT
Number 1238
CHAIRMAN BUNDE adjourned the House Health, Education and Social
Services Standing Committee at 5:00 p.m.
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