Legislature(2001 - 2002)
04/20/2001 01:08 PM Senate FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
April 20, 2001
1:08 PM
TAPES
SFC-01 # 81, Side A
CALL TO ORDER
Co-Chair Pete Kelly reconvened the meeting at approximately 1:08
PM.
PRESENT
Senator Dave Donley, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Jerry Ward, Vice Chair
Senator Loren Leman
Senator Lyda Green
Senator Gary Wilken
Senator Alan Austerman
Senator Lyman Hoffman
Senator Donald Olson
Also Attending: EDDY JEANS, Manager, School Finance and Facilities
Section, Education Support Services, Department of Education and
Early Development.
SUMMARY INFORMATION
SB 174-EDUCATION FUNDING
The Committee considered five amendments and adopted four. The
Committee heard from the Department of Education and Early
Development and the bill reported from Committee.
[This meeting had been recessed to the call of the chair. Minutes
for the earlier portion of the meeting are recorded separately.]
SENATE BILL NO. 174
"An Act relating to education funding; and providing for an
effective date."
This was the second hearing for this bill in the Senate Finance
Committee.
Amendment #1: This amendment inserts a new bill section on page 2,
following line 17 to read as follows.
Sec. 3. AS 14.17.510 is amended by adding a new subsection to
read:
(c) Notwithstanding AS 14.17.410(b)(2)(A) and the other
provisions of this section, if the assessed value in a city or
borough school district determined under (a) of this section
increases from the base year, only 50 percent of the increase
in assessed value may be included in determining the assessed
value in a city or borough school district under (a) of this
section. The limitation on the increase in assessed value in
this subsection applies only to a determination of assessed
value for purposes of calculating the required contribution of
a city or borough school district under AS 14.17.410(b)(2)(A)
and 14.17.490(b). In this subsection, the base year is 2000.
Senator Wilken moved for adoption.
Senator Hoffman objected for discussion.
Senator Wilken spoke to the amendment, saying that the current
education foundation funding formula is calculated using student
population multiplied by student dollar, which equals the "basic
need" and from that amount, the required local contribution is
subtracted. He defined local contribution as the amount each
community in organized areas of the state is required to contribute
before qualifying for state funding. He stated the local
contribution is the equivalent of four mils of the "full and true
assessed value" of the property contained within the boundary of
the organized community.
Senator Wilken detailed how, under current statute, each increase
in assessed value is passed along to property owners as an increase
in the amount of property tax due for the local education
contribution. He explained that this amendment provides that the
state splits the cost of increases in assessed property value with
the property taxpayer so that instead of paying four mils toward
the local education contribution, the property owner only pays two
mils on any assessment increases. He characterized this amendment
as a property tax relief for "all of organized Alaska."
Senator Wilken opined this amendment, "recognizes the fact that the
state and the communities are in a joint effort to make this a
better place to live and to do that through having a better
education system."
Senator Hoffman referred to the amendment's accompanying worksheet,
"Impact of Senate Bill 174 Amendment by Senator Wilken" and asked
why some of the required local increases are shown as a negative,
when the amendment sponsor stated, "everyone was benefiting."
Senator Wilken replied this is a function of the increase or
decrease in assessed value. He noted that if the assessed value
decreases in an organized community, there is no "increased need
because the assessed value hasn't gone up."
Senator Hoffman asked for clarification that the communities
showing negative figures have decreased assessed values.
Senator Wilken affirmed and pointed out that the figures are
"relatively correct" in their application to this amendment.
Senator Wilken noted that of the predicted $8 million increase in
revenue for the state resulting from increased assessed values, the
property taxpayers would only have to contribute $4 million.
Co-Chair Kelly emphasized that under this amendment, "no community
has to end up paying more" and that communities qualifying for the
provision would "qualify to pay less." He added that the current
four-mil equivalent would apply to any community with a decreased
assessed value.
Senator Hoffman asked if the estimated increase to the state
general fund is $3.7 million.
Senator Wilken affirmed. He added that the figures provided are
based on Department of Education and Early Development projections
for FY 02.
Co-Chair Kelly was uncertain whether this amendment provides
increased funding to the general fund.
Senator Leman explained it results in an increased liability to the
general fund.
Senator Austerman asked if this amendment was an incentive for
communities to raise assessed values.
Senator Wilken replied that assessed value is based on a number of
factors. If the local economy is healthy, he said, assessed value
should increase on a regular basis. He surmised that if assessed
values continually decrease there are several incentives to improve
the economy.
Co-Chair Kelly added that assessed value is established by law or
local ordinance and would be difficult to manipulate. He suggested
that a community would need to ensure current recordings of
assessed values.
Senator Wilken agreed and stressed it is a function of law and that
organized communities in Alaska have an established assessor
process.
Senator Hoffman asked the reasoning for this amendment.
Senator Wilken responded that because of the recently failed ballot
proposal to limit the mil rate to ten mils, the public is clamoring
for tax relief and this amendment provides some. He continued that
the legislature works to make the state more successful, which is
measured in assessed value, but then the successes are passed along
to the community in the form of higher taxes. He saw this amendment
as a partnership between the state and local municipalities to
improve assessed values.
Senator Austerman commented that a number of communities in
Southeastern Alaska show no increases in assessed values. He
attributed this to the state of the timber industry.
A roll call was taken on the motion.
IN FAVOR: Senator Leman, Senator Ward, Senator Wilken, Senator
Austerman, Senator Green, Co-Chair Donley and Co-Chair Kelly
OPPOSED: Senator Olson and Senator Hoffman
The motion PASSED (7-2)
The amendment was ADOPTED.
Senator Wilken directed members' attention to material to be
distributed that was supplied by the Mat-Su Borough school district
along with a chart showing the full and true value change in
Anchorage, Fairbanks, Juneau, Kenai, Mat-Su and the statewide.
[Copies on file.]
Amendment #2: This amendment changes the average daily membership
(ADM) in Section 3(2) from 400 to 425. The amended language reads
as follows.
(2) a community with an ADM of at least 101, but not more
than 400 [750], shall be counted as
(A) one elementary school, which includes those
students in grades kindergarten through six [6]; and
(B) one secondary school, which includes students in
grades seven [7] through 12;
New Text Underlined [DELETED TEXT BRACKETED]
Co-Chair Donley moved for adoption.
The amendment was ADOPTED without objection or discussion.
AT EASE 1:18 PM / 1:21 PM
Amendment #3: This conceptual amendment inserts new language in
Section 1 (b)(2) on page 2 following line 14 to read, "subsection
(B) is limited to districts in which the per student assessed value
is not less than $2,000,000."
Co-Chair Donley explained this would limit the effect of the
increase to 100 percent of a district's basic need to only those
communities that currently have a per pupil assessed value of over
$2 million.
Senator Hoffman stressed, "This is a pretty monumental change
affecting all school districts in the state," and requested a
representative from the Department of Education and Early
Development address the amendment.
AT EASE 1:22 PM / 1:26 PM
Senator Hoffman gave a scenario of a school burning down and asked
if this amendment would "hamstring" the rebuilding of that school
if it were in a district that exceeds the $2 million assessment
amount. He wanted to know if the school district would be unable to
issue new bonds to cover construction costs.
EDDY JEANS, Manager, School Finance and Facilities Section,
Education Support Services, Department of Education and Early
Development, testified that because he had no notice this bill and
its amendments would be considered at this time, he was unprepared
to speak on the matter.
Mr. Jeans then corrected his response to a different hypothetical
situation Co-Chair Kelly raised at an earlier hearing for this bill
regarding the perception that the Fairbanks school district
receives less state aid then it otherwise would receive if the
North Slope Borough (NSB) was required to contribute the equivalent
of four mils toward its local education. He stated that the only
way the Fairbanks North Star Borough (FNSB) would receive more
money is with an increase in base student allocation under the
foundation funding formula. Therefore, he said, NSB receiving funds
under the foundation funding formula does not alter the amount of
funds the FNSB receives.
Co-Chair Kelly stated that the witness would not be required to
testify on matters without the opportunity to prepare.
Senator Hoffman asked if the department supports the bill in its
current version.
Mr. Jeans reiterated that the department is on the record in
opposition to the bill.
Co-Chair Donley restated the conceptual amendment and moved for
adoption.
Senator Hoffman objected and asked why the sponsor deemed this
amendment necessary.
Co-Chair Donley responded it is fair to require a community with
wealth to pay more toward its local education in an amount closer
to that currently required of those communities subject to the
four-mil property tax contribution. He stressed, "I think it's self
evident," and noted that this amendment adds a "third factor" to
the existing four-mil equivalency and the 45 percent factor, which
this bill increases to 100 percent. He stated that this amendment
"would recognize that those communities who haven't gone that much
in debt, would not be subject to the 100 percent change, but those
communities that have chosen to go farther in debt would be." He
surmised this is "based on an assessment of their local wealth and
their ability to pay and the fact that even with that they're still
not going to be paying the four mils that many other communities
are in fact paying, and in fact some communities are paying more
than four mils, a lot more than four mils."
Senator Hoffman spoke to his objection saying it is primarily
targeting one school district, which is the NSB district. He
emphasized that the Alaska Association of School Boards is on
record in opposition of the "targeting" of any one school district.
Senator Wilken opined that "it deserves to be said, we derive our
monies to fuel the K-12 formula across the state on assessed
value." He listed the per-student asset base in the NSB as $5.5 to
$6 million. He compared this to the statewide average of $400,000
per student. He remarked, "I don't target the North Slope, I target
the inequity and inequality of that asset base being able to
support a certain level of K-12." He continued, "Because of the law
that's in place, they're required on their asset base to fund it at
half of the people that I represent." He stressed that this is the
issue this amendment "speaks to", pointing out that if a district
has an asset base 30 times that of the remainder of the state, "I
don't think it's unfair to ask that you pay for your education."
Senator Olson understood the reasoning behind the argument but
stressed that the NSB has funded some "very expensive programs"
that are normally funded by the state in other communities. He
surmised that since the NSB plays an active part in funding such
items as public health, including local hospitals, clinics and
water and sewer projects, to add the education requirements, "is
almost like strapping another burden" onto the NSB. He predicted
that removing almost $10 million from the school district would
"cause a fair amount of disruption of the services for the
students." He noted that this coupled with the decreased oil
production would "have a very detrimental effect on the people of
the district that I represent."
Co-Chair Donley corrected his earlier statements regarding bonding
indebtedness, saying he intended to speak to assessed value.
Senator Hoffman addressed Senator Wilken's comments regarding
"letting them pay their fair share" pointing out that Amendment #1,
sponsored by Senator Wilken, mainly benefited Anchorage at $1.8
million and Fairbanks at $554,000. Senator Hoffman calculated that
64 percent of the $3.7 million benefited those two communities. It
seemed to him that "somebody is being targeted" and "somebody is
being a major benefactor."
A roll call was taken on the motion.
IN FAVOR: Senator Ward, Senator Wilken, Senator Austerman, Senator
Green, Senator Leman, Co-Chair Donley and Co-Chair Kelly
OPPOSED: Senator Hoffman and Senator Olson
The motion PASSED (7-2)
The amendment was ADOPTED.
Amendment #4: This conceptual amendment gives the co-chairs
authority to change the title of the committee substitute.
Co-Chair Donley explained this amendment gives the co-chairs, "the
latitude to construct a title that more accurately reflects the
content of the new committee substitute."
Senator Hoffman objected saying that due to the importance of the
matter, any title changes should come before the entire Committee.
Senator Olson made a motion to delete Section 1 from the committee
substitute.
[This motion was out of order as there was a motion already on the
table.]
AT EASE 1:40 PM / 1:42 PM
Co-Chair Donley restated that the amendment is to give the co-
chairs the flexibility to draft a title that reflects the contents
of the bill in more detail. He stated that this may or may not be
possible in the given timeframe.
Senator Hoffman spoke to his objection emphasizing that the title
to any legislation is "crucial" in how it is drafted. Therefore, he
urged the Committee to "act responsibly" and review any changes to
the bill title as a unit.
A roll call was taken on the motion.
IN FAVOR: Senator Wilken, Senator Austerman, Senator Green, Senator
Leman, Senator Ward, Co-Chair Donley and Co-Chair Kelly.
OPPOSED: Senator Hoffman and Senator Olson
The motion PASSED (7-2)
The amendment was ADOPTED.
Amendment #5: This amendment deletes Section 1 from the bill.
Senator Olson moved for adoption.
Co-Chair Kelly objected.
Senator Olson remarked that the exit exam activities have shown the
need for more education assistance rather than less in the NSB
school district. He asserted that reducing funding would have "a
further negative effect" in the education of the students and their
performance on the exit exams. He did not judge it fair to take
away from one school district for the benefit of another.
Senator Wilken clarified, "It doesn't come from the school
district. The monies come from the borough and appropriated to the
school district." Therefore, he stressed there is no direct
relationship between this bill and the school districts.
A roll call was taken on the motion.
IN FAVOR: Senator Austerman, Senator Hoffman and Senator Olson
OPPOSED: Senator Green, Senator Leman, Senator Ward, Senator Wilken
Co-Chair Donley and Co-Chair Kelly
The motion FAILED (3-6)
The amendment FAILED to be adopted.
Co-Chair Donley offered a motion to report from Committee, SB 174,
as amended with a new Department of Education and Early Development
fiscal note for $1,600,800.
Senator Hoffman made a motion to table the bill.
Senator Ward called for the question.
A roll call was taken on the motion to table the bill.
IN FAVOR: Senator Olson and Senator Hoffman
OPPOSED: Senator Ward, Senator Wilken, Senator Austerman, Senator
Green, Senator Leman, Co-Chair Donley and Co-Chair Kelly
The motion FAILED (2-7)
The committee substitute FAILED to be tabled.
A roll call was taken on the motion to report the bill from
Committee.
IN FAVOR: Senator Green, Senator Leman, Senator Ward, Senator
Wilken, Senator Austerman, Co-Chair Donley and Co-Chair Kelly
OPPOSED: Senator Hoffman and Senator Olson
The motion PASSED (7-2)
The amended bill MOVED from Committee.
[Note: The bill was not transmitted to the Senate Secretary at this
time. The Committee later rescinded its action to move the bill,
adopted Amendment #6, and reported the bill from Committee. See
minutes of April 24, 2001 for complete account.]
ADJOURNMENT
Co-Chair Pete Kelly adjourned the meeting at 01:48 PM.
| Document Name | Date/Time | Subjects |
|---|