Legislature(1993 - 1994)
03/17/1994 09:00 AM Senate CRA
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SENATE COMMUNITY & REGIONAL AFFAIRS
March 17, 1994
9:00 a.m.
MEMBERS PRESENT
Senator Randy Phillips, Chairman
Senator Loren Leman
Senator Al Adams
MEMBERS ABSENT
Senator Robin Taylor, Vice Chairman
Senator Fred Zharoff
COMMITTEE CALENDAR
ALASKA EDUCATION FOUNDATION FORMULA
Duane Guiley, Department of Education
ACTION NARRATIVE
TAPE 94-22, SIDE A
Number 001
The Senate Community & Regional Affairs Committee was called to
order by Chairman Randy Phillips at 9:00 a.m.
SENATOR RANDY PHILLIPS:
Before the committee we have a review of the school foundation
formula as it exists. Mr. Guiley.
DUANE GUILEY, DIRECTOR, SCHOOL FINANCE, DEPT. OF EDUCATION:
Mr. Chairman, thank you. Based on some questions that came up
at our previous review, I've prepared three additional handouts for
the committee.
One of the questions that arose at the previous meeting that
we couldn't answer with the information we had is what effect there
would be on large urban communities, such as Anchorage, if we were
to roll all of the schools into one funding community.
The blue handout gives you both the existing scenario where in
the case of Anchorage we have three funding communities entitled
"Anchorage, Eagle River and Girdwood." As we work through the
formula at each of the independent funding communities, they each
develop separate K-12 units, as well as bilingual education units
if they are serving bilingual children at those locations. We
notice in Girdwood that there are zero units for bilingual
education; special education units at all three locations; and voc
ed units at two of the locations. Voc ed units are only available
for secondary grade levels, and, in the case of Girdwood, we only
offer it at elementary grade level at that location. The existing
state aid at the bottom of the schedule shows $177,592,837.
The second page is a comparison. If all three locations were
rolled into one funding community under the regulatory definition
for "unified city borough," it would result in a loss to the
Anchorage School District of $758,840.
SENATOR RANDY PHILLIPS:
Lets go back to the first page. The bilingual units for Eagle
River is at 1.40. Is that based on people participating in that?
DUANE GUILEY:
Yes, sir, that's based on the number of children that are
measured under what's called "allow category" -- a language
assessment category, and children qualify under one of five
different scenarios. The funding is available to the school
district, and the district does not have to spend the money on
those students; they earn the money based on the students
identified.
SENATOR RANDY PHILLIPS:
And the same thing for special ed?
DUANE GUILEY:
In comparing Eagle River to Anchorage, more than 10 percent of
their total units are coming from special ed.
Again, Mr. Chairman, if you recall, the bilingual, special ed
and voc ed units are duplicative in that that child is also counted
into the K-12 unit first.
Also, by way of comparison, the yellow sheet shows the same
scenario in the Fairbanks North Star Borough School District.
Fairbanks North Star Borough currently operates with five funding
communities. They generate, with those five funding communities,
state aid of $62,843,796, and if all were rolled into one funding
community, it would result in a loss to that district of
$1,926,380.
The only thing that changes in each of the scenarios is the
total amount of basic need. The deducts from basic need, which are
the 4 mill local contribution and the impact aid deduct, remain
unchanged, so any resulting change from basic need ends up in an
equal change to state aid in each scenario.
SENATOR ADAMS:
An overall question on these and others has to do with the
status of the PL81-874 funding. Do you have that for us?
DUANE GUILEY:
Yes, sir, I do.
There are currently two pieces of legislation that have been
introduced in Congress for the purpose of reauthorizing the Public
Law 81-874 program. On the House side it is currently referred to
as HR 6. In both bodies it is referred to as Title 8 in their
bills. On the Senate side it is SB 1513.
HR 6, the way it has passed the House committee, (and it is
blocked from further amendments at this point) would result in
approximately an eight percent increase in total revenue to the
state. But based on the disparity standard that's included in the
bill, the state would no longer be able to recognize impact aid
payments in distributing state aid. Therefore, we would have a $43
million general fund shortfall in our formula and it would require
an additional increment of $43 million to fully fund education.
On the Senate side, SB 513, which is just beginning its
subcommittee hearing process, significantly changes the dollar
amount available to support each and every student. Based on
calculations from U.S. DOE, they indicate that Alaska would lose as
much as $50 million under their scenario. Alaska would still be
allowed to do the deduct, but, of course, we would be doing a
deduct on significantly less dollars, so we would end up with
approximately a $20,000,000 to $25,0000,000 general fund shortfall
in distributing state aid. The districts themselves would
significantly lose more through the reduction in the local
contribution rate, or the federal aid rate per eligible student.
In talking with our Congressional delegation, it appears that
it will end up in a conference committee to work out the final
details. We've notified the Congressional delegation of the
department's desire, of course, that we still be allowed to do the
deduct in our formula, thereby not putting the burden on our State
Legislature of trying to determine how to fund the $43 million
shortfall.
We're attempting to get support from the school districts, and
the school districts, of course, have mixed opinions. Those that
would gain by not having the state deduct, for the most part,
oppose the department's position. Those that would lose under a
potential proration of unit value in the event of the $43 million
support the department's position. Some of those that would gain
the most are actually expressing support for the department's
position because they are fearful that it may be something that
requires a significant rewrite of our foundation formula and right
now they are not interested in having a rewrite of the formula.
SENATOR RANDY PHILLIPS:
Mr. Guiley, would you put that in writing for the committee,
and keep it real simple.
SENATOR ADAMS:
Using Anchorage as an example, the total under PL81-874 is
almost $12,000,000. In either piece of legislation in Congress,
are there different kinds of formulas under 874 that affect
different schools in different ways?
DUANE GUILEY:
Yes, sir. On the Senate version, SB 1513, the formula is most
similar to the current law, although it adds a third step. So most
districts that receive impact aid today would continue to receive
impact aid, but they would be reduced approximately 60 percent from
their current receipt. Taking Anchorage as an example, Anchorage
would lose approximately $7,000,000 of their receipt under the
Senate version, and that 60 percent would be spread evenly
throughout the state.
Under the House version, HR 6, the formula is much more
complex, and districts would enjoy the 8 percent increase only if
the law is fully funded at the federal level. Based on estimates
from U.S. DOE, at the current time it would take approximately $1.6
billion to fund the program nationally. Most recently, the
appropriation has only been $842 million so, therefore, there would
be a significant proration across the nation.
In the proration portion of HR 6 -- again, it is very complex
-- it would require a second calculation of what's called a
"learning opportunity threshold." The purpose of the learning
opportunity threshold is to determine the significance of impact
aid in relation to the total budget, and those districts that rely
more heavily on impact aid would be prorated last. So districts
like Anchorage that do not have a heavy reliance on impact aid
would be prorated among the first group. Districts such as Yupiit
School District, Lower Yukon, Bering Straits, Northwest Arctic and
Lower Kuskokwim would be prorated last. The more rural districts,
as opposed to the urban districts, would, in all likelihood, still
receive some sort of an increase under impact aid. Our urban
districts would, in all likelihood, receive zero unless the federal
government doubles the appropriation amount that they have had in
the past under impact aid.
SENATOR ADAMS:
Would the effect of something like this and the funding start
in October.
DUANE GUILEY:
Yes, sir. The federal fiscal year begins October 1; the
effect on the school districts would be felt this next school year.
Under our state formula we delay the recognition one year, so it
would be FY 96, under the state fiscal year, when we have an effect
in our general fund under the current law.
SENATOR RANDY PHILLIPS:
Are you relaying this information to the Finance committees.
DUANE GUILEY:
Yes, sir. Each time we testify on our budget -- we've had a
two-page handout that briefly describes the issues on both the
Senate and House side, and I would be glad to share that with the
committee.
I do have a one-page handout of the potential proration and I
could describe to you verbally what the situation would be in the
event that the state is unable to deduct the impact aid in our
formula and our State Legislature is unwilling to fund the
additional $43 million required. It would require a significant
proration of our urban districts.
As an example, in the case of Anchorage where they receive
nearly $12 million of impact aid, even after keeping that $12
million receipt in tact and keeping 100 percent of that money,
their share of the proration will be over $17 million. So, they
would have a net reduction of $6.8 million.
As a comparison, Adak School District, which is scheduled to
receive $457,000 in state aid next year, if we're unable to deduct,
would actually receive an increase of $2,138,000 over and above
their scheduled receipt of $457,000. So their state aid would go
up five times while Anchorage had a loss of $6.8 million.
By way of additional comparison, the district in Juneau would
be prorated to a loss of $1,629,000, and because they are so close
to the cap, that would result in them having to give back local tax
dollars as well. So, their net loss would be about $2.2 million to
their current operating budget. Their current operating budget is
just over $22 million so they would have to reduce their program by
approximately 10 percent of state dollars, as well as local
dollars.
It affects primarily the urban districts who have the greater
number of students and the lower receipt of impact aid. By way of
another example, the Kenai School District would have a net loss of
$3,273,000; Matsu School District, $3,602,000.
The fear from some of those districts that do receive impact
aid is: even though they might get an increase in impact aid,
these losses in the large districts may create enough need or
desire to rewrite our formula in that our formula was written on
the basis of equalization. If we're no longer provided the
opportunity to deduct impact aid, we no longer have an equalized
formula, in fact, we'd have a disequalized formula.
The chart begins by looking at the governor's proposed funding
level for education with a prorated unit value of $59,855. If, in
fact, we have the $43 million shortfall in general funds, the unit
value would be prorated down to $56,390, and the net effect of the
districts being able to keep 100 percent of their impact and their
share of the $43 million proration shown in the third column, so
that is a net number.
SENATOR RANDY PHILLIPS:
Anchorage would lose about $6.8 million and Annette Island
would get a net gain of about $1 million. Can you explain that.
DUANE GUILEY:
Annette Island relies very significantly on impact aid.
Currently, their students enjoy only 45 percent of their budget as
support from the state government; 55 percent of their budget is
made up of federal dollars. That's because, basically, 100 percent
of their students are impact aid eligible, so that results in a
significant savings to the state in state support for that district
through the equalization. So, if we're no longer able to equalize,
they would keep 100 percent of their impact aid receipt and they
would have an almost 60 percent increase in their total operating
budget.
Another example in the opposite direction is the Lower
Kuskokwim School District. They receive a little over $8 million
in impact aid; the state recognizes through a deduct 90 percent of
that money as a reduction in state aid received. So, again, if
we're no longer able to recognize that deduction, they would keep
100 percent of the impact aid, and then after their share of
proration is absorbed, they would still end up with a net increase
of $3,511,000.
The back of the sheet shows the effect on local contribution
rate. Again, the local contribution rate has a cap, and that cap
currently, under state statute, is 23 percent of current year basic
need as adjusted for proration. So, the purpose of the first
column at $61,000 shows how much the district could contribute
under the $61,000 scenario. The column with the $59,855 is current
governor's budget. The potential $56,390 is if, in fact, we
prorate due to the loss of impact aid. So, in comparing that
column to the budgeted column, anyone that has a negative number
would have to give back local dollars. So, the first negative
number there, Juneau, $614,000, would be local dollars they would
have to give back assuming that their FY 95 budget number is equal
number to their FY 94 budget number for local contributions.
Currently, that is the best and most recent information we have.
We have no idea how that will actually vary from their FY 95
budget.
SENATOR RANDY PHILLIPS:
So Senator Adams' area, the North Slope, would lose about $6
million, right?
DUANE GUILEY:
No, this positive number indicates that they could actually
contribute $6 million more to their budget on this schedule, so
only the bracketed numbers are those districts that would lose
local dollars. Going back to your district, Anchorage would still
have an opportunity to contribute another $27,072,000 local
contribution under the worse case scenario proration.
Under the worse case scenario of proration of the $43 million,
there is $54.8 million of local capacity for potential increases to
school operating budgets. if there was the desire at the local
level. That compares, currently, to just over $61 million at the
$61,000 unit value.
SENATOR RANDY PHILLIPS:
I know Senator Taylor has talked a lot about Anchorage not
contributing to the level -- is that the $27 million he is talking
about?
DUANE GUILEY:
Yes, it is.
Number 320
There being no further questions or further business to come before
the committee, the meeting was adjourned at 9:24 a.m.
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