Legislature(2005 - 2006)SENATE FINANCE 532

04/20/2006 09:00 AM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 471 KNIK ARM BRIDGE AND TOLL AUTHORITY TELECONFERENCED
Moved SCS CSHB 471(FIN) Out of Committee
*+ SB 1 INCREASE AMT OF BASE STUDENT ALLOCATION TELECONFERENCED
Heard & Held
+= SB 188 BULK FUEL REVOLVING LOAN FUND CAP TELECONFERENCED
Moved CSSB 188(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
                            MINUTES                                                                                           
                    SENATE FINANCE COMMITTEE                                                                                  
                         April 20, 2006                                                                                       
                           9:06 a.m.                                                                                          
                                                                                                                                
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair  Lyda  Green  convened   the  meeting  at  approximately                                                               
9:06:54 AM.                                                                                                                   
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde, Vice-Chair                                                                                                   
Senator Fred Dyson                                                                                                              
Senator Bert Stedman                                                                                                            
Senator Donny Olson                                                                                                             
Senator Lyman Hoffman                                                                                                           
                                                                                                                                
Also  Attending:  REPRESENTATIVE  BILL  STOLTZE;  WILLIAM  GREEN,                                                             
Project Counsel,  Knik Arm Bridge  and Toll  Authority; STEPHANIE                                                               
ALLISON,  Parent and  Member,  Glacier  Valley Elementary  School                                                               
Site Council; MARY HAKALA, Parent  and Member, Alaska Kids Count!                                                               
Network;  MARY BECKER,  State  President,  Association of  Alaska                                                               
School Boards;  Member, Juneau School  Board; and  Retired School                                                               
Teacher;  CARL ROSE,  Executive Director,  Association of  Alaska                                                               
School Boards; JOHN ALCANTRA,  Government Relations Director, NEA                                                               
Alaska; MARY  FRANCIS, Executive Director, Alaska  Association of                                                               
School Administrators;  ANDREA STORY,  Parent and  Member, Juneau                                                               
School Board                                                                                                                    
                                                                                                                                
Attending via  Teleconference: From an offnet  site: LARRY WIGET,                                                             
Director, Government  Relations, Anchorage School  District; From                                                               
Valdez: KATHY  TODD, Member,  City of  Valdez School  Board; From                                                               
Kenai: MELODY  DOUGLAS, Chief Financial Officer,  Kenai Peninsula                                                               
Borough School District; JENNIE HAMMOND, Nikiski Resident                                                                       
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
HB 471-KNIK ARM BRIDGE AND TOLL AUTHORITY                                                                                       
                                                                                                                                
The Committee heard from the  bill's sponsor and a representative                                                               
of  the  Knik   Arm  Bridge  and  Toll   Authority.  A  committee                                                               
substitute was adopted and the bill reported from Committee.                                                                    
                                                                                                                                
SB 188-BULK FUEL REVOLVING LOAN FUND CAP                                                                                        
                                                                                                                                
The  Committee heard  from the  bill's sponsor  and reported  the                                                               
bill from Committee.                                                                                                            
                                                                                                                                
SB 1-INCREASE AMT OF BASE STUDENT ALLOCATION                                                                                    
                                                                                                                                
The  Committee heard  from  the bill's  sponsor  and took  public                                                               
testimony.  One amendment  was considered  but  not adopted.  The                                                               
bill was held in Committee.                                                                                                     
                                                                                                                                
                                                                                                                                
     CS FOR HOUSE BILL NO. 471(FIN) am                                                                                          
     "An Act amending the Knik  Arm Bridge and Toll Authority Act                                                               
     and the  powers and  authority of  the authority  to finance                                                               
     construction and maintenance of the  Knik Arm Bridge, to set                                                               
     and  collect  tolls,  and  to  carry  out  its  duties;  and                                                               
     providing for an effective date."                                                                                          
                                                                                                                                
                                                                                                                                
This was  the first hearing for  this bill in the  Senate Finance                                                               
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Green noted  that a committee substitute  was before the                                                               
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken  moved to adopt committee  substitute Version 24-                                                               
LS1670\L as the working document.                                                                                               
                                                                                                                                
Co-Chair  Green announced  that the  Senate version  (SB 303)  of                                                               
this  bill  had  previously  reported   from  Committee  and  was                                                               
currently in  the Senate Rules  Committee. However, the  House of                                                               
Representatives (House)  made "substantive" changes to  the House                                                               
companion bill, and, as a  result, Senate Rules has requested the                                                               
Committee  consider the  House version  of the  bill. The  bill's                                                               
sponsor would  discuss the changes  contained in the  Version "L"                                                               
committee substitute.                                                                                                           
                                                                                                                                
9:08:44 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BILL STOLTZE, the  bill's sponsor, shared with the                                                               
Committee his long-term involvement with  the Knik Arm Bridge and                                                               
Toll Authority  (KABATA) project. This legislation  would further                                                               
"a  commitment"  to   provide  "the  details  of   the  plan  and                                                               
mechanisms" that  was made after  the initial  KABATA legislation                                                               
was adopted. He  explained the two changes the House  made to the                                                               
bill: the first removed the  State's ability to attach a person's                                                               
Permanent  Fund  Dividend  (PFD)  to address  unpaid  fines.  The                                                               
second eliminated  language pertaining  to the  issuance, renewal                                                               
or  reinstatement of  drivers'  licenses.  These provisions  were                                                               
removed in  order to focus  the bill  on the construction  of the                                                               
bridge.   He  had   been  uncomfortable   with  the   amount  "of                                                               
government" in  the original  bill and thought  it "best  to take                                                               
those provisions out".                                                                                                          
                                                                                                                                
Co-Chair   Green  referred   the   Committee  to   Representative                                                               
Stoltze's Sectional  Analysis of the  bill [copy on  file], which                                                               
further explained the changes in the committee substitute.                                                                      
                                                                                                                                
Representative   Stoltze  continued   to   explain  the   changes                                                               
contained  in  Version  "L",   characterizing  a  bill  amendment                                                               
adopted "on the  fly in a careless fashion" during  a House floor                                                               
session  as   "innocuous".  The  amendment  would   have  limited                                                               
KABATA's  authority  and  would   have  served  to  restrict  its                                                               
function.  The  initial  authority  provided  to  KABATA  by  the                                                               
Legislature would allow it to  interact with outside business and                                                               
the  financial market  without  any  politicizing. The  amendment                                                               
adopted on the House floor re-injected political involvement.                                                                   
                                                                                                                                
Co-Chair Green  asked whether the  language being  referenced was                                                               
located in  Section 1(a)(18) page 3,  line 29 of the  House bill,                                                               
Version 24-LS1670\I.A.                                                                                                          
                                                                                                                                
Representative Stoltze affirmed.                                                                                                
                                                                                                                                
Co-Chair  Green thereby  noted that  Version "L"  eliminated that                                                               
language, as  it was "directly  contrary to the function  and the                                                               
role  of the  Toll Authority  itself". Version  "L" would  retain                                                               
KABATA's  authority and  not require  the Governor's  approval of                                                               
its actions.                                                                                                                    
                                                                                                                                
Representative Stoltze concurred.                                                                                               
                                                                                                                                
Co-Chair  Green  noted that  Version  "L"  retained language  the                                                               
House  added to  Section 1(a)(18)  page 3,  line 31,  which would                                                               
affirm that  KABATA's powers of  eminent domain would  not exceed                                                               
those of the State.                                                                                                             
                                                                                                                                
Senator  Green   reiterated  that  action  taken   in  the  House                                                               
eliminated the ability  of KABATA to place "a  lien" on someone's                                                               
PFD were they "in violation of something at the Toll".                                                                          
                                                                                                                                
9:12:31 AM                                                                                                                    
                                                                                                                                
Representative  Stoltze   reminded  that  the  garnishing   of  a                                                               
person's PFD is a provision  commonly exercised by municipalities                                                               
in regards  to such things as  unpaid fines. However, due  to the                                                               
fact  that  any reference  or  inclusion  of language  about  the                                                               
Permanent  Fund or  the Permanent  Fund Dividend  tends to  "mire                                                               
down" and "confuse"  an issue, it was his desire  to exclude that                                                               
provision from the  bill in order to focus on  building a bridge.                                                               
Omitting the PFD attachment would  not hinder KABATA's functions;                                                               
"it could collect unpaid tolls in another fashion".                                                                             
                                                                                                                                
9:13:12 AM                                                                                                                    
                                                                                                                                
Co-Chair Green asked whether this  was also the reason behind the                                                               
decision  to exclude  language  addressing individuals'  drivers'                                                               
licenses or vehicle  registrations in regards to  unpaid tolls or                                                               
other violations.                                                                                                               
                                                                                                                                
Representative Stoltze affirmed.                                                                                                
                                                                                                                                
Co-Chair  Wilken  understood  the  difference  between  committee                                                               
substitute  Version  "L"  and  the  House  version,  Version  24-                                                               
LS1670\I.A was the deletion of the authority of the Governor.                                                                   
                                                                                                                                
Co-Chair Green affirmed.                                                                                                        
                                                                                                                                
Co-Chair Wilken asked  for confirmation that the  words "or money                                                               
that  the legislature  may appropriate"  as specified  in Section                                                               
1(a)(12) page  3, line  15 would  "not obligate  the State  to be                                                               
supporter  or  the  court  of  last resort"  were  there  a  bond                                                               
deficiency.                                                                                                                     
                                                                                                                                
9:14:30 AM                                                                                                                    
                                                                                                                                
WILLIAM  GREEN,  Project  Counsel,   Knik  Arm  Bridge  and  Toll                                                               
Authority, affirmed  the language  would "not obligate  the State                                                               
to do anything  nor" would it obligate the  State's general fund.                                                               
It mirrors  "similar provisions included in  other titles dealing                                                               
with similar facilities.  It is simply there  to acknowledge that                                                               
if  the Legislature  desired to  appropriate monies  it may,  but                                                               
it's no obligated to."                                                                                                          
                                                                                                                                
9:15:18 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  communicated concerns expressed by  residents in                                                               
the State about  the Knik Arm Bridge, the  Gravina Island Bridge,                                                               
and  the access  road  out  of Juneau  in  regards  to how  those                                                               
projects might impact the National  Highway System (NHWS) funding                                                               
the  State  would  receive  over  the  next  several  years.  The                                                               
Administration  has been  requested  to develop  a five-year  pro                                                               
forma to  address how those projects  would be funded as  well as                                                               
how the NHWS funding would be  dispersed on a statewide basis. To                                                               
that  point,  he   asked  Mr.  Green  whether  he   has  been  in                                                               
communication with the Administration in this regard.                                                                           
                                                                                                                                
Mr. Green  disclosed that some preliminary  discussions had taken                                                               
place.  He   deferred  to  the  Administration   to  provide  the                                                               
conclusions of the discussions.                                                                                                 
                                                                                                                                
9:16:22 AM                                                                                                                    
                                                                                                                                
Senator Stedman opined that the  five-year pro forma would assist                                                               
in  furthering   the  interpretation   of  the   federal  Highway                                                               
Authorization   bill,   Safe   Accountable   Flexible   Efficient                                                               
Transportation Equity  Act: A Legacy  for Users  (SAFETEA-LU). He                                                               
suggested that, when the final  plan is developed, the discussion                                                               
could include SAFETEA-LU funding.                                                                                               
                                                                                                                                
There being  no objection, the  Version "L"  committee substitute                                                               
was ADOPTED as the working document.                                                                                            
                                                                                                                                
Co-Chair  Wilken moved  to report  the bill  from Committee  with                                                               
individual recommendations and accompanying fiscal notes.                                                                       
                                                                                                                                
There being  no objection, SCS  CS HB 471(FIN) was  REPORTED from                                                               
Committee with  two previous  zero fiscal  notes: Fiscal  note #1                                                               
dated January 22,  2006 from the Department  of Natural Resources                                                               
and fiscal  note #2 dated  March 1,  2006 from the  Department of                                                               
Transportation and Public Facilities.                                                                                           
                                                                                                                                
Senator  Hoffman  asked  whether   it  is  anticipated  that  the                                                               
Administration's  response to  the  request for  a five-year  pro                                                               
forma  would be  provided prior  to Senate  floor action  on this                                                               
bill.                                                                                                                           
                                                                                                                                
Co-Chair Green  understood otherwise,  as the primary  concern is                                                               
not specific to this legislation.                                                                                               
                                                                                                                                
Co-Chair Wilken  agreed that this  legislation is "a part  of the                                                               
whole  picture",  however, not  to  the  point that  this  bill's                                                               
progression  should  be  halted.  Continuing,  he  shared  having                                                               
recently sent  a memorandum to  Department of  Transportation and                                                               
Public Facilities  Commissioner Mike Barton reminding  him of the                                                               
specifics of the request.                                                                                                       
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 188(CRA)                                                                                            
     "An Act increasing the maximum amount of loans from the                                                                    
     bulk fuel revolving loan fund to one borrower."                                                                            
                                                                                                                                
                                                                                                                                
9:19:00 AM                                                                                                                    
                                                                                                                                
This was the  second hearing for this bill in  the Senate Finance                                                               
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Green  reminded that  committee substitute,  Version 24-                                                               
LS0952\S, had  been adopted  during the  bill's first  hearing in                                                               
the Committee.                                                                                                                  
                                                                                                                                
9:19:19 AM                                                                                                                    
                                                                                                                                
Senator  Olson, the  bill's sponsor,  communicated that  the bill                                                               
would  increase  the  loan  limit allowed  under  the  Bulk  Fuel                                                               
Revolving  Loan Fund  program;  thereby  allowing communities  to                                                               
purchase  larger  quantities of  bulk  fuel  and to  account  for                                                               
higher fuel costs.                                                                                                              
                                                                                                                                
Co-Chair Wilken  asked whether either  Amendment #1  or Amendment                                                               
#2 [copies on file] had been adopted.                                                                                           
                                                                                                                                
Co-Chair Green expressed neither  had been adopted. [Amendment #1                                                               
was offered but failed to be  adopted during the first hearing on                                                               
the bill. Amendment #2 had been withdrawn.]                                                                                     
                                                                                                                                
Senator  Olson  moved to  report  the  bill from  Committee  with                                                               
individual recommendations and accompanying fiscal notes.                                                                       
                                                                                                                                
There  being  no objection,  CS  SB  188(FIN) was  REPORTED  from                                                               
Committee with new  zero fiscal note dated February  8, 2006 from                                                               
the Department of Commerce, Community and Economic Development.                                                                 
                                                                                                                                
9:20:56 AM                                                                                                                    
                                                                                                                                
                                                                                                                                
     SPONSOR SUBSTITUTE FOR SENATE BILL NO. 1                                                                                   
     "An Act relating to the  base student allocation used in the                                                               
     formula  for   state  funding   of  public   education;  and                                                               
     providing for an effective date."                                                                                          
                                                                                                                                
                                                                                                                                
This was  the first hearing for  this bill in the  Senate Finance                                                               
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Wilken,  the bill's sponsor, reminded  the Committee the                                                               
funding provided  to K-12 public  schools is the  "single largest                                                               
general  fund appropriation"  made annually  by the  Legislature;                                                               
education funding  would exceed one  billion dollars in  FY 2007.                                                               
This bill  would address the  student component as  determined by                                                               
the Base Student Allocation (BSA)  funding formula. He referenced                                                               
a  chart  titled "Alaska  K-12  Funding"  [copy on  file],  often                                                               
referred  to as  Governor Frank  Murkowski's "Pencil  Chart". The                                                               
Pencil  Chart  depicts K-12  BSA  funding  amounts from  FY  1999                                                               
though FY  2007. The Sponsor  Statement was read into  the record                                                               
as follows.                                                                                                                     
                                                                                                                                
     Since  1998,  the K-12  public  school  funding formula  has                                                               
     distributed state  education dollars based on  a per student                                                               
     allocation. Sponsor  Substitute for Senate Bill  1 increases                                                               
     this  allocation  by  $433,  establishing  the  per  student                                                               
     dollar at $5,352.                                                                                                          
                                                                                                                                
     Sponsor Substitute  for Senate  Bill 1 recognizes  that day-                                                               
     to-day  educations costs  continue  to  increase, causing  a                                                               
     financial  strain on  the school  budgets in  all 53  school                                                               
     districts. The 8.8 percent proposed  increase in the student                                                               
     dollar will help mitigate these  rising costs, thus allowing                                                               
     local school  boards to direct  more education  dollars into                                                               
     the classroom.                                                                                                             
                                                                                                                                
     Unfortunately  school districts  are  also  burdened with  a                                                               
     five   percent   increase   in   their   required   employer                                                               
     contribution  to two  retirement systems,  Public Employees'                                                               
     Retirement System  and Teachers' Retirement  System. Sponsor                                                               
     Substitute for Senate Bill 1  will generate the needed funds                                                               
     to  cover these  costs,  estimated to  increase $40  million                                                               
     statewide in FY 07.                                                                                                        
                                                                                                                                
     Please join  me in support  of our public school  system and                                                               
     give your approval to Sponsor Substitute for Senate Bill 1.                                                                
                                                                                                                                
9:23:22 AM                                                                                                                    
                                                                                                                                
Senator Bunde  likened the proposed  FY 2007 BSA funding  to that                                                               
of FY 2006 in that approximately  half of it would be utilized to                                                               
fund   public  education's   retirement  system   obligation.  He                                                               
estimated  that  approximately  $45  million  of  the  total  $90                                                               
million  FY 2007  BSA  would be  used in  this  manner; only  $45                                                               
million would be funneled to support classroom needs.                                                                           
                                                                                                                                
9:24:01 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken clarified  that $40 million would  be utilized to                                                               
fund  public   school's  FY  2007   obligations  to   the  Public                                                               
Employees'  Retirement  System  (PERS) and  Teachers'  Retirement                                                               
System (TRS).  The $50 million  balance would be utilized  in the                                                               
classroom. In FY  2006, $30 million of the total  $70 million BSA                                                               
funding supported  the PERS  and TRS  obligation and  $40 million                                                               
went to the classroom.                                                                                                          
                                                                                                                                
Co-Chair Wilken identified the Pencil  Chart as "a good chart" as                                                               
it reflects the  year-to-year increase in the  BSA; however, some                                                               
considerations are  missing. It  should be  noted that,  while it                                                               
would appear there was no change  in BSA levels in 2002 and 2003,                                                               
the fact  is that  those years' BSAs  included "logs"  which were                                                               
kept at  the time.  The chart depicts  an approximate  36 percent                                                               
increase  in  the  BSA  from 1999  through  2007.  One  component                                                               
missing from  the chart is  the number of students  educated each                                                               
year. The  number of students  educated in 1999 was  133,000; the                                                               
projection for  2007 is 132,000 students.  Funding has increased,                                                               
while  the student  count has  remained  essentially flat.  While                                                               
there  is  a  concentrated  effort to  "drive  dollars  into  the                                                               
classroom" those  who might  support increasing  the FY  2007 BSA                                                               
level  further  should  be  mindful  of the  fact  the  State  is                                                               
spending more money on the  same amount of students. "That should                                                               
be on the table for discussion."                                                                                                
                                                                                                                                
9:26:06 AM                                                                                                                    
                                                                                                                                
Senator Bunde, observing  the BSA has increased  33 percent since                                                               
2004,  asked  whether  a  chart could  be  developed  to  reflect                                                               
student achievement performance during that timeframe.                                                                          
                                                                                                                                
9:26:30 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  reminded that  legislation sponsored  by Senator                                                               
Bunde in  1997 furthered student  performance measurements.  As a                                                               
result,  such  information  is  being  compiled  and  efforts  to                                                               
increase student performance are  occurring in the various school                                                               
districts.                                                                                                                      
                                                                                                                                
9:26:59 AM                                                                                                                    
                                                                                                                                
Senator Bunde  noted many  school districts  are being  forced to                                                               
use  the majority  of funds  received from  the State  to address                                                               
increasing overhead and maintenance  needs rather than being able                                                               
to utilize it  in the classroom. The Department  of Education and                                                               
Early  Development   has  granted  waivers  to   numerous  school                                                               
districts  in this  regard even  though State  law designates  60                                                               
percent of  the funding districts  receive from the  State should                                                               
be  utilized  in the  classroom.  He  suggested consideration  be                                                               
given  to  "consolidating"  school   districts,  as  53  separate                                                               
districts exceeds  the level  required to  support the  number of                                                               
students being educated in the State.                                                                                           
                                                                                                                                
Co-Chair  Wilken clarified  State law  as currently  requiring 70                                                               
percent rather  than 60 percent  of State  funding to be  used to                                                               
support  the classroom.  Provisions in  previously adopted  SB 36                                                               
were intended  to curb school  districts that were  spending half                                                               
of  their  State  funds to  support  administration  rather  than                                                               
classroom  needs.  That  legislation  "has worked  to  a  certain                                                               
degree … but  there's a number of school districts  that do claim                                                               
waivers",  some  of which  are  valid.  While the  Department  is                                                               
responsible for  reviewing those  requests, it  might be  time to                                                               
revisit  the effort  and ensure  that 70  percent of  the funding                                                               
provided by the State is "driven to the classroom".                                                                             
                                                                                                                                
9:29:01 AM                                                                                                                    
                                                                                                                                
Senator  Bunde agreed  the  issue should  be  "revisited", as  he                                                               
understood that waivers are being granted automatically.                                                                        
                                                                                                                                
9:29:08 AM                                                                                                                    
                                                                                                                                
Senator  Hoffman asked  regarding the  FY 2007  BSA breakout  for                                                               
PERS/TRS and classroom funding.                                                                                                 
                                                                                                                                
Co-Chair  Wilken specified  that  $50 million  would provide  for                                                               
classroom needs  and $40 million  would support  TRS obligations.                                                               
In FY 2006,  the breakout was $40 million for  classrooms and $30                                                               
million for TRS.                                                                                                                
                                                                                                                                
Senator  Hoffman expressed  that the  "substantial increases"  in                                                               
heating fuel  and other utility  costs experienced by  schools in                                                               
the State  would greatly reduce  the amount of  funding available                                                               
to the  classrooms; numerous  schools would  be forced  to layoff                                                               
teachers. This is  the reason for his concern  about the proposed                                                               
level of  funding. School  districts and  education organizations                                                               
throughout   the  State   view  the   proposed  $90   million  as                                                               
insufficient. While  he would  not propose  an amendment  at this                                                               
time, he  expected this would be  a topic of discussion  when the                                                               
bill advanced to the full Senate.                                                                                               
                                                                                                                                
9:30:51 AM                                                                                                                    
                                                                                                                                
Senator  Stedman pointed  out that  the  full impact  of the  TRS                                                               
obligation on the education system  has not yet been experienced;                                                               
there  would  be  "several more  years  of  incremental"  payroll                                                               
increases. This unfunded liability  would continue to "erode" the                                                               
dollars  being  allocated to  education.  This  would impact  the                                                               
effort to get more dollars in the classroom.                                                                                    
                                                                                                                                
Senator  Stedman  noted  another  "struggle."  The  Sitka  School                                                               
District  and  other  school  districts,  particularly  those  in                                                               
southern  Southeast Alaska,  "are  disadvantaged  in the  formula                                                               
that  is used  to  allocate the  financial  resources around  the                                                               
State."  An   effort  should  be  conducted   "to  rectify"  this                                                               
situation.                                                                                                                      
                                                                                                                                
Senator Stedman  stated that,  in addition to  the effort  to get                                                               
more  funding into  the  classroom, the  effort  should focus  on                                                               
addressing "the  pension liability"  which would  "approach fifty                                                               
percent of payroll here in a  few years". This is a "huge" issue.                                                               
Monies should  also be "allocated  in a more equitable  manner so                                                               
that  the children  around the  State have  equal opportunity  in                                                               
education which I don't believe they have today…"                                                                               
                                                                                                                                
9:32:25 AM                                                                                                                    
                                                                                                                                
Senator  Bunde observed  that a  separate  Senate bill  currently                                                               
being considered  would allocate  ten million  additional dollars                                                               
to school  districts in "higher cost  areas of the State  to help                                                               
with  their  education."  "All  sources  of  funding"  should  be                                                               
considered when discussing school funding.                                                                                      
                                                                                                                                
Senator  Bunde, in  regards to  Senator Stedman's  comments about                                                               
the  plight of  school  districts in  southern Southeast  Alaska,                                                               
recalled receiving a  letter the previous year  from two teachers                                                               
on Prince of Wales Island  who were considering leaving the State                                                               
were local  taxes imposed. The  fact that their community  had no                                                               
local taxes rather than "their  love of learning or their wanting                                                               
to work with  children or even for an adventure…"  was the reason                                                               
they had accepted teaching positions there.                                                                                     
                                                                                                                                
9:33:32 AM                                                                                                                    
                                                                                                                                
Senator Stedman  clarified that  the inequities  he spoke  of are                                                               
not between  the organized and unorganized  boroughs, but instead                                                               
are  between  "the  organized areas  where  people  are  actually                                                               
paying for  their schools" via  such things as local  mill rates.                                                               
The  school districts  in  Ketchikan,  Wrangell, Petersburg,  and                                                               
Sitka are disadvantaged in comparison  to other organized borough                                                               
school districts.                                                                                                               
                                                                                                                                
9:34:31 AM                                                                                                                    
                                                                                                                                
There  being  no  further Committee  discussion,  Co-Chair  Green                                                               
stated that  public testimony would  commence. In order  to allow                                                               
time for  all desiring  to testify, remarks  would be  limited to                                                               
three minutes per testifier.                                                                                                    
                                                                                                                                
9:34:58 AM                                                                                                                    
                                                                                                                                
LARRY  WIGET, Director,  Government  Relations, Anchorage  School                                                               
District, testified  via teleconference from an  offnet site and,                                                               
on behalf of the Anchorage  School Board and the Anchorage School                                                               
District Administration, communicated that  the total $92 million                                                               
BSA  proposed by  the  Governor be  increased  an additional  six                                                               
million dollars.  This would allow  the State's  school districts                                                               
"to maintain a rigorous and  effective instructional program that                                                               
continues   to  increase   student  academic   proficiency."  The                                                               
proposed  $5,352 BSA  level would  be insufficient  to allow  the                                                               
Anchorage School  District's FY 2006/2007 operating  budget to be                                                               
maintained  at  the  FY  2005/2006  level  "without  implementing                                                               
budget reductions and increasing student participation fees".                                                                   
                                                                                                                                
Senator  Bunde asked  "the percentage  of  the maximum  allowable                                                               
local  [education]   contribution"  currently  provided   by  the                                                               
Municipality of Anchorage.                                                                                                      
                                                                                                                                
Mr. Wiget did  not have that information; however,  he noted that                                                               
Anchorage's  local   education  contribution,  like   many  other                                                               
communities   in   organized   boroughs,  is   paying   a   local                                                               
contribution "up to what the local tax cap allows".                                                                             
                                                                                                                                
Senator Bunde  stated that rather  than the question  being about                                                               
the local tax  cap, the question pertained to the  percent of the                                                               
local allowable  contribution that  Anchorage could pay.  To that                                                               
point, he understood Anchorage only  pays "about 80 to 85 percent                                                               
of what the local contribution could be".                                                                                       
                                                                                                                                
Mr. Wiget  thought Anchorage paid "several  million dollars below                                                               
the current" contribution allowable by State law.                                                                               
                                                                                                                                
Senator Bunde pointed out it  is often professed, "that the State                                                               
is not providing enough money".  However, it should be noted that                                                               
"in some  cases, like  Anchorage, the  locals" are  not providing                                                               
their maximum contribution.                                                                                                     
                                                                                                                                
9:37:34 AM                                                                                                                    
                                                                                                                                
KATHY TODD,  Member, City of  Valdez School Board,  testified via                                                               
teleconference from  Valdez and  urged the  Committee to  adopt a                                                               
higher  BSA.  The  proposed  level  would  not  provide  for  the                                                               
community's PERS and TRS increased  obligation or the increase in                                                               
electricity   expenses.  Even   though   the  District   conducts                                                               
conservation  efforts such  as turning  off  lights and  lowering                                                               
thermostat  settings,  the  expense  of three  month's  worth  of                                                               
electricity now  equates to  one year of  a teacher's  salary. At                                                               
the current proposed  BSA level, the district would  be forced to                                                               
terminate ten percent of its  teachers plus classified personnel.                                                               
The BSA  money would  not find  its way  into the  classroom, but                                                               
would  instead provide  for required  materials, energy,  and the                                                               
retirement  system  obligations.  The  BSA must  be  at  a  level                                                               
through  which   a  quality   well-rounded  education   could  be                                                               
provided.                                                                                                                       
                                                                                                                                
9:39:21 AM                                                                                                                    
                                                                                                                                
MELODY DOUGLAS, Chief Financial  Officer, Kenai Peninsula Borough                                                               
School  District, testified  via  teleconference  from Kenai  and                                                               
communicated that  preliminary numbers indicate the  proposed BSA                                                               
would be insufficient to support  the District's status quo after                                                               
such  things  as  increases  in   insurance,  fuel  and  utility,                                                               
retirement  obligations,  and  "a  modest  amount  set  aside  to                                                               
address the  collective bargaining process" are  factored in. The                                                               
District's budget  revenue shortfall would be  approximately $3.6                                                               
million.                                                                                                                        
                                                                                                                                
Ms. Douglas  communicated that, as  a result of demands  from the                                                               
legislature,  educational  organization,   and  parents  for  low                                                               
pupil/teacher ratios (PTR), the District  expended FY 06 funds to                                                               
ensure  "effective  class  sizes".   However,  due  to  increased                                                               
utility  expenses,  accounts, enrollment  under-projections,  and                                                               
other unforeseen  situations, the School  Board approved a  FY 07                                                               
budget  increasing  PTR  by  three  students  "for  all  staffing                                                               
formulas".  The  District  is  anticipating  a  reduction  of  63                                                               
teacher positions  in FY  07, for  a 13  percent decrease  in the                                                               
District's  teaching staff.  22 positions  would be  lost due  to                                                               
declining enrollment and  41 due to the PTR  formula change. Some                                                               
classes would exceed  30 students. There would also  be losses of                                                               
vocational  education, art,  and  foreign  language classes,  and                                                               
reductions  in  librarians  and counselors.  While  the  District                                                               
currently   has   administrators  servicing   several   different                                                               
schools,  there  is anticipation  of  further  increases in  this                                                               
practice. The Kenai Peninsula Borough  would fund the District at                                                               
the  maximum allowable  level in  FY 07;  however this  "level of                                                               
support continues  to be a  struggle considering  their financial                                                               
constraints. An increase  in the mill rate" would  be required to                                                               
provide the FY  07 funding. Even though  local residents recently                                                               
rejected a local  sales tax increase initiative,  the issue would                                                               
be  introduced again  this  year, as  the  Borough would  require                                                               
additional revenue  in order to  continue funding schools  at the                                                               
maximum allowable level.                                                                                                        
                                                                                                                                
Ms. Douglas  acknowledged the importance of  Statewide equity and                                                               
avowed,  "something  must  be done"  to  counteract  the  funding                                                               
shortfalls  declining   enrollment  is   having  on   the  School                                                               
District. "District  cost factors  must be adjusted"  in addition                                                               
to  the  BSA.   She  appreciated  the  efforts   exerted  by  the                                                               
Legislature in addressing education needs.                                                                                      
                                                                                                                                
9:42:13 AM                                                                                                                    
                                                                                                                                
JENNIE  HAMMOND, Nikiski  Resident, testified  via teleconference                                                               
from  Kenai and  shared with  the Committee  the negative  affect                                                               
current  school  funding is  having  on  her son  and  daughter's                                                               
elementary school class sizes. The  Nikiski North Star Elementary                                                               
School has  415 students this year  and a loss of  25 students is                                                               
anticipated in FY 07; the  number of teachers would decrease from                                                               
16 to 14. More funding would  be required to offset the projected                                                               
three  student   PTR  increase.  The  school   promotes  parental                                                               
involvement  and in  excess  of 3,000  hours  of volunteer  time,                                                               
valued at $35,000,  has occurred this year.  Urging the Committee                                                               
to increase the BSA in order  to allow more teachers to be hired,                                                               
she  noted the  Borough  currently supports  its  schools at  the                                                               
maximum allowable level. In addition,  she urged consideration of                                                               
district cost differentials.                                                                                                    
                                                                                                                                
9:44:03 AM                                                                                                                    
                                                                                                                                
[NOTE:  The  remainder  of  the   public  testimony  occurred  in                                                               
Juneau.]                                                                                                                        
                                                                                                                                
STEPHANIE ALLISON,  Parent and Member, Glacier  Valley Elementary                                                               
School  Site Council,  informed  the Committee  she had  received                                                               
both her secondary and post  secondary education in the State. As                                                               
a  Certified   Public  Accountant,  she  found   the  information                                                               
provided   on  the   Pencil  Chart   "interesting"  but   lacking                                                               
consideration of the "comparable  expenses" experienced from year                                                               
to  year. In  addition to  the increased  PERS and  TRS expenses,                                                               
other expenses such as health  care, utilities, and overhead have                                                               
"substantially"   increased.  A   review   of  the   year-to-year                                                               
comparisons  of  these  expenses  would  be  encouraged.  Funding                                                               
should support salaries that would  attract quality teachers. The                                                               
City  and  Borough  of  Juneau continues  to  contribute  to  its                                                               
schools  at  the State's  maximum  allowable  funding level.  The                                                               
Juneau  School District  (JSD) endeavored  successfully to  lower                                                               
its  PTR  this  past  year;  however, those  PTRs  could  not  be                                                               
maintained under  the proposed BSA. She  could personally testify                                                               
to the  positive impact low PTRs  have on a teacher's  ability to                                                               
teach, specifically  in the Kindergarten through  third grade (K-                                                               
3)  levels.  K-3 class  sizes  exceeding  20 students  negatively                                                               
impact  the  ability  of  a  teacher to  manage  the  class.  The                                                               
proposed BSA  would also reduce  the number of  elementary school                                                               
counselors. Those people provide  substantial support to students                                                               
needing  such   assistance.  She   acknowledged  this   being  "a                                                               
difficult issue", particularly as  there are numerous "variances"                                                               
between  school  districts  and community  funding  support.  She                                                               
supported  the  establishment  of  "a  permanent  endowment"  for                                                               
schools. Such action would negate  the demand on both legislators                                                               
and citizens to re-address the issue each year.                                                                                 
                                                                                                                                
9:46:59 AM                                                                                                                    
                                                                                                                                
Co-Chair Wilken asked Valdez testifier,  Ms. Todd, to further her                                                               
remarks attesting  that the district's "retirement  costs weren't                                                               
covered in this legislation".                                                                                                   
                                                                                                                                
Ms. Todd  understood the  proposed BSA  might be  insufficient to                                                               
provide for the District's increased PERS and TRS costs.                                                                        
                                                                                                                                
Co-Chair  Wilken  noted  the  legislation  would  provide  Valdez                                                               
$315,937 for FY 07 PERS and TRS expenses.                                                                                       
                                                                                                                                
Ms. Todd  communicated that the  District's business  manager has                                                               
estimated  the  additional  FY  07  PERS/TRS  expense  to  exceed                                                               
$400,000.                                                                                                                       
                                                                                                                                
Co-Chair  Wilken  requested  Ms.  Todd  to  have  the  District's                                                               
business manager  contact him to  discuss this further as  he had                                                               
understood Valdez's increased PERS/TRS expense would be covered.                                                                
                                                                                                                                
Ms. Todd would convey the message to the business manager.                                                                      
                                                                                                                                
9:48:47 AM                                                                                                                    
                                                                                                                                
MARY HAKALA,  Parent and Member,  Alaska Kids Count!  Network, "a                                                               
grass roots  non-partisan network  of citizens who  are advocates                                                               
for  great  schools in  Alaska",  communicated  there being  many                                                               
parents concerned  about their children's education.  Even though                                                               
education funding has increased over  the years, it has "not kept                                                               
pace" with  such things as  overhead, PERS/TRS,  fuel, inflation,                                                               
and health  insurance premium costs. School  districts are unable                                                               
to  control  these  expenses.  There  is  a  negative  impact  on                                                               
classrooms "when revenues  do not meet expenses".  Such things as                                                               
larger  PTRs,  reduced staff  and  student  support, and  reduced                                                               
course  offerings  occur.  The   proposed  BSA  would  erode  the                                                               
capabilities of  schools. She  urged the  Committee to  review an                                                               
Alaska Kids Count! Network handout  [copy on file], which depicts                                                               
the  effects of  the  proposed BSA  on schools  in  the City  and                                                               
Borough of Juneau,  where she resides. In order  to meet overhead                                                               
expenses and provide a minimal  amount toward improving classroom                                                               
conditions,  the BSA  funding  should be  an  investment of  $150                                                               
million rather  than $90 million. The  goal of the Network  is to                                                               
get money into classrooms. She  hoped her children "would grow up                                                               
realizing  that government  is  accessible  and responsive".  She                                                               
also  noted that  businesses consider  the  quality of  education                                                               
offered in  a community  when deciding whether  or not  to locate                                                               
there. Being  successful in attracting businesses  to a community                                                               
would increase  its tax  base and would  assist in  reducing such                                                               
things as individual's property tax burdens.                                                                                    
                                                                                                                                
9:52:36 AM                                                                                                                    
                                                                                                                                
MARY  BECKER,  State  President,  Association  of  Alaska  School                                                               
Boards; Member, Juneau School Board;  and Retired School Teacher,                                                               
shared that  in her  capacity as State  President, she  has heard                                                               
the needs of districts throughout  the State. The Association has                                                               
participated in the development  of numerous districts' strategic                                                               
plans.  Input from  parents and  communities is  also encompassed                                                               
into a  community's school district  strategic plan.  These plans                                                               
are an integral  part of a school district's  operation as budget                                                               
decisions and other educational decisions  are based on the plan.                                                               
The Juneau  School District's strategic  plan is affected  by the                                                               
annual  BSA   amount.  Recent  BSA   funding  levels   have  been                                                               
inadequate   and  programs   and  positions   supporting  certain                                                               
strategic  plan   goals  that  encourage   communication  between                                                               
parents  and  the  school  district   have  been  curtailed.  One                                                               
important element of the District's  strategic plan is the effort                                                               
to  support staff  training. This  would assist  the District  to                                                               
develop  highly  qualified staff  and  to  remain compliant  with                                                               
State and  federal requirements. Other focuses  of importance are                                                               
healthy  attitudes   and  behaviors,   safety  in   schools,  bus                                                               
transportation,  "Alaska Native  success, and  graduation success                                                               
for all".                                                                                                                       
                                                                                                                                
Ms. Becker  declared the  proposed BSA  would be  insufficient to                                                               
provide for  the needs  of the  Juneau School  District Strategic                                                               
Plan. The  District's Truancy Tracker position,  three "drop-out"                                                               
counselor positions, support for  students having difficulty with                                                               
passing the High School Qualifying  Exam, and literacy assistance                                                               
positions would  be eliminated. School activities  would decrease                                                               
and  the District's  PTR would  increase three  to five  students                                                               
across the board. She urged the Committee to increase the BSA.                                                                  
                                                                                                                                
9:57:32 AM                                                                                                                    
                                                                                                                                
Senator Bunde,  a former  educator, avowed,  "it is  difficult to                                                               
pay  a very  good teacher  too much".  Continuing, he  noted that                                                               
separate  legislation  is  being considered  that  would  provide                                                               
"merit  pay"  to  schools  meeting  certain  student  achievement                                                               
standards. He  asked whether  the Association  had a  position on                                                               
that legislation.                                                                                                               
                                                                                                                                
Ms. Becker replied the Association  has reviewed the legislation,                                                               
but has not taken a "supportive position" on it.                                                                                
                                                                                                                                
Senator Bunde  encouraged the Association  to further  review the                                                               
merit pay  program legislation,  as it would  be a  means through                                                               
which to increase teacher compensation.                                                                                         
                                                                                                                                
9:58:08 AM                                                                                                                    
                                                                                                                                
Senator Stedman asked  whether the Association has  had a "policy                                                               
discussion"  addressing  "the   escalation  of  employee  benefit                                                               
contributions that's  going to  push 50  percent of  payroll" and                                                               
salary  increases anticipated  in the  forthcoming years,  within                                                               
its attempt to provide more funds to classrooms.                                                                                
                                                                                                                                
9:59:55 AM                                                                                                                    
                                                                                                                                
CARL  ROSE,  Executive  Director, Association  of  Alaska  School                                                               
Boards,  informed   the  Committee  that  each   school  district                                                               
negotiates  its  own  salaries;  there  is  no  statewide  salary                                                               
schedule.  Nonetheless, the  impact  of increased  salaries is  a                                                               
statewide  concern. Furthermore,  while  the  Association has  no                                                               
formal   position  on   the  issue   of  the   unfunded  PERS/TRS                                                               
obligations,  it has  attempted to  make districts  aware of  the                                                               
"growing" impact of this unfunded liability.                                                                                    
                                                                                                                                
Mr.  Rose noted  several proposals  are being  considered through                                                               
which  to  address  the PERS/TRS  issue,  including  bonded  debt                                                               
legislation being advanced by the  House of Representatives Rules                                                               
Committee.  The Association  does  not have  "the wherewithal  to                                                               
address" the  issue and  districts must  continue to  provide the                                                               
employee contribution portion, which  school districts assumed in                                                               
the  mid  1980s.  At  that  time, there  was  no  indication  the                                                               
obligation would  become such  a problem. It  was only  in recent                                                               
years the  districts became aware  of the unfunded  liability. In                                                               
summary, while the  Association does discuss this  issue with the                                                               
districts,  it  has  not  addressed the  issue,  as  each  school                                                               
district deals with employee negotiations individually.                                                                         
                                                                                                                                
10:01:16 AM                                                                                                                   
                                                                                                                                
Ms. Becker  stressed the importance  of teacher  salaries keeping                                                               
pace  with  cost  of  living   increases.  Districts  are  losing                                                               
teachers and are  having "an extremely difficult  time" in hiring                                                               
specialists such  as special education  and speech  teachers. "It                                                               
is a concern."                                                                                                                  
                                                                                                                                
10:01:45 AM                                                                                                                   
                                                                                                                                
Co-Chair  Green  pointed  out  that  "the  State  has  been  very                                                               
generous in working with  communities, departments, agencies, and                                                               
school districts  in funding  the increase  for the  past several                                                               
years.  That is  not  the  State's obligation."  It  is a  school                                                               
district and  community obligation.  The State's  funding support                                                               
of the PERS/TRS  issue should be recognized, as  it provided more                                                               
than it was required to contribute.                                                                                             
                                                                                                                                
10:02:24 AM                                                                                                                   
                                                                                                                                
Mr.  Rose voiced  appreciation for  the State's  funding support.                                                               
Assuming  the PERS/TRS  obligation  placed a  "strain" on  school                                                               
district finances.  The State's support  was "a huge  relief" for                                                               
the school  districts. Districts  continue to  be in  a difficult                                                               
situation,  as  they must  also  address  the increase  in  fixed                                                               
costs.                                                                                                                          
                                                                                                                                
Co-Chair Green noted the intent of  her remarks was to ensure the                                                               
State's  effort was  being recognized  and that  school districts                                                               
were aware of their responsibility.  The unfunded liability could                                                               
not be addressed in the short term.                                                                                             
                                                                                                                                
10:03:12 AM                                                                                                                   
                                                                                                                                
Mr.  Rose assured  that the  conversation is  occurring. Had  the                                                               
State not provided $40 million  toward the issue, the money would                                                               
have been "come straight out of the classrooms".                                                                                
                                                                                                                                
10:03:25 AM                                                                                                                   
                                                                                                                                
Senator Bunde  remarked that  "due to  bad actuarial  advice that                                                               
was passed  onto the Legislature by  previous retirement boards",                                                               
the PERS and TRS retirement  system was under-funded. That led to                                                               
this  unfunded liability  situation. The  Legislature enacted  SB
141-PUBLIC  EMPLOYEE/TEACHER RETIREMENT/BOARDS  in  an effort  to                                                               
curtail that situation. That legislation  made "major changes" to                                                               
the retirement  system, as  continuance of  the status  quo would                                                               
have  acerbated the  situation.  To that  point, "some  organized                                                               
effort  to  delay  the implementation  of"  that  legislation  is                                                               
occurring. A  one-year delay  would allow  an additional  year of                                                               
liability to  be incurred. People are  apparently "more concerned                                                               
about their  individual benefits than the  quality of education".                                                               
He   asked   whether   the  Association   is   opposed   to   the                                                               
implementation of SB 141 and is encouraging its delay.                                                                          
                                                                                                                                
10:04:53 AM                                                                                                                   
                                                                                                                                
Mr.  Rose   communicated  that  while  Association   members  are                                                               
concerned with  the impacts  of SB 141,  the Association  has not                                                               
taken a  position on  its implementation.  Retirement liabilities                                                               
are  a  nationwide  issue  and  many  large  companies  are  also                                                               
"seeking  relief".  School  districts "concerns  moving  forward"                                                               
include "attracting  and retaining" employees and  numerous other                                                               
issues.                                                                                                                         
                                                                                                                                
10:05:52 AM                                                                                                                   
                                                                                                                                
Senator Bunde  "encouraged" the Association to  consider the fact                                                               
that  continuance  of the  existing  system  would incur  further                                                               
unfunded liabilities on the system.  "Every dollar that goes into                                                               
those benefits is a dollar that cannot go into the classroom."                                                                  
                                                                                                                                
JOHN   ALCANTRA,  Government   Relations  Director,   NEA/Alaska,                                                               
informed  the  Committee  that  the  NEA/Alaska  bargaining  unit                                                               
represents approximately 13,000 employees.                                                                                      
                                                                                                                                
10:06:43 AM                                                                                                                   
                                                                                                                                
Mr. Alcantra  thanked Co-Chair Wilken,  "a warrior  for education                                                               
funding"   from   kindergarten   through  the   University,   for                                                               
sponsoring this legislation.                                                                                                    
                                                                                                                                
Mr. Alcantra  specified $5,611  as being  the BSA  recommended by                                                               
NEA/Alaska.  This  would be  a  $55  million increase  above  the                                                               
current  $90  million  proposal. The  discussions  have  included                                                               
"adequate funding of  public education" as well as  the fact that                                                               
an  inadequate level  of education  funding  occurred during  the                                                               
years  1983  through 2002.  While  funding  in recent  years  has                                                               
significantly  increased, that  20-year  span  of flat  education                                                               
funding negatively  affected schools. While some  might interpret                                                               
NEA/Alaska's  request for  increased  funding  beyond that  being                                                               
proposed  as  "looking a  gift  horse  in the  mouth",  newspaper                                                               
headlines  across the  State underscore  the fact  that increased                                                               
levels of  school funding are  necessary. For example,  the Kenai                                                               
School District  would be forced to  terminate 75 schoolteachers,                                                               
The  Matanuska-Susitna (Mat-Su)  School  District  would be  four                                                               
million dollars  short, and the  Anchorage School  District would                                                               
be two million dollars short.  A January 2006 survey conducted by                                                               
NEA/Alaska indicated  that not "a  single school district  in the                                                               
State" has  agreed that  the proposed BSA  would be  adequate. He                                                               
allowed that  some of  those responses  might have  changed since                                                               
January, as  The Fairbanks North  Star School District  has since                                                               
testified that the proposed BSA would be adequate.                                                                              
                                                                                                                                
Mr.  Alcantra acknowledged  being  unaware  of the  Legislature's                                                               
total  proposed education  increase in  the FY  07 State  budget;                                                               
however,  noted that  the 8.8  percent BSA  increase proposed  in                                                               
this  bill does  not  align with  the  Governor's overall  budget                                                               
increase  of 16.3  percent, which  is double  the increase  being                                                               
provided  to K-12  BSA funding.  He voiced  appreciation for  the                                                               
Legislature's  effort in  helping with  the PERS/TRS  problem and                                                               
other  issues;  however, the  goal  is  to get  adequate  funding                                                               
levels. NEA/Alaska has worked diligently  "to develop a plan that                                                               
would create a  funding mechanism to achieve adequacy  over … the                                                               
next eight years". Approximately  $155 million more funding above                                                               
the $90 million proposed in this  bill would be required to reach                                                               
adequacy  today. While  voicing  appreciation  for the  "positive                                                               
direction"  that  is  occurring,  he reiterated  the  request  to                                                               
increase the FY 07 BSA to $5,611.                                                                                               
                                                                                                                                
10:10:27 AM                                                                                                                   
                                                                                                                                
Senator   Stedman  reviewed   the  recent   BSA  increases:   the                                                               
compounded BSA growth  rate for the past four years  has been 7.5                                                               
percent, and, when  the FY 07 BSA is factored  in, the compounded                                                               
rate  would  increase  to  7.75  percent.  Thus,  at  this  rate,                                                               
NEA/Alaska's request for  a BSA of $5,611 would  be achieved with                                                               
just  a  slight  delay.  Based  on the  recent  rate  of  growth,                                                               
education funding would double in 9.6 years.                                                                                    
                                                                                                                                
Senator  Stedman puzzled  as to  whether NEA/Alaska's  eight-year                                                               
adequacy target considered a BSA  rate as influenced by declining                                                               
enrollment. The forward trends are troubling.                                                                                   
                                                                                                                                
10:11:44 AM                                                                                                                   
                                                                                                                                
Senator Bunde  shared that, during his  Legislative career, there                                                               
have been  "two constants:  one, oil  forecasts are  always wrong                                                               
and  two,  there's never  adequate  funding  for education".  Two                                                               
separate bills being advanced,  SB 112-TAX ON RESIDENTS/EMPLOYEES                                                               
IN  REAA;GRANTS  and  SB 235-SCHOOL  PERFORMANCE  BONUSES,  would                                                               
provide  an  additional  $15 million  for  schools.  Noting  that                                                               
NEA/Alaska is on  record in opposition to SB 235,  he inquired to                                                               
their position on SB 112.                                                                                                       
                                                                                                                                
10:12:49 AM                                                                                                                   
                                                                                                                                
Mr. Alcantra responded  NEA/Alaska has no position on  SB 112. He                                                               
suggested  further discussion  should occur  in regards  to other                                                               
contributions that  might be being  made by the districts  in the                                                               
Rural Education Attendance Areas (REAAs).  Even though the SB 235                                                               
fiscal note has been reduced  from $15.2 million to $5.8 million,                                                               
that money could be put "to better use."                                                                                        
                                                                                                                                
Senator Bunde  questioned what  better use  could there  be "than                                                               
rewarding successful teachers".                                                                                                 
                                                                                                                                
Mr. Alcantra  responded the  money could  be utilized  to support                                                               
such things as  mentoring programs and "to train  teachers how to                                                               
be  successful".  Although  Department  of  Education  and  Early                                                               
Development  Commissioner  Roger  Sampson has  developed  a  good                                                               
proposal, it mirrors other merit  pay programs in the nation that                                                               
have failed.  There are numerous  other successful  programs this                                                               
funding could more appropriately support.                                                                                       
                                                                                                                                
10:14:10 AM                                                                                                                   
                                                                                                                                
Senator Hoffman referred to Senator  Stedman's comments about the                                                               
positive   advancement   being   made   in   education   funding.                                                               
Nonetheless,  there is  "no  guarantee"  that future  legislators                                                               
would continue  to support increased funding  for education. This                                                               
is substantiated  by the  periods of flat  funding on  record. In                                                               
addition,  the price  of oil  is unpredictable  and who  the next                                                               
governor  would be  is  an unknown.  Thus  saying that  education                                                               
funding would continue to move  in the right direction "cannot be                                                               
forecast".  The  Legislature  should  determine  the  appropriate                                                               
funding level  necessary for  today. Estimating  future education                                                               
expenses provides  "very little consolation" to  school districts                                                               
and to students.                                                                                                                
                                                                                                                                
Senator  Hoffman  avowed teachers  would  be  laid off  were  the                                                               
proposed BSA adopted.  This would result in "a  lower standard of                                                               
education".                                                                                                                     
                                                                                                                                
10:15:39 AM                                                                                                                   
                                                                                                                                
Co-Chair  Wilken  asked  the  process  through  which  NEA/Alaska                                                               
determined its BSA recommendation of $5,611.                                                                                    
                                                                                                                                
10:15:56 AM                                                                                                                   
                                                                                                                                
Mr. Alcantra responded the amount  had been calculated in January                                                               
2006 and included  projected costs from FY 2008  through FY 2014.                                                               
He  was "hesitant"  to  provide the  calculation  summary, as  it                                                               
could  present "some  sticker shock",  as K-12  education funding                                                               
needs would double over the  next eight years. NEA/Alaska's FY 07                                                               
$145  million   calculation  would  include  $39.7   million  for                                                               
PERS/TRS expenses  and a three percent  inflation factor equating                                                               
to $25  million. A portion  of the eight-year adequacy  plan cost                                                               
would be  used to recover  approximately $80 million of  the $641                                                               
million  gap in  education funding  resulting from  the education                                                               
funding levels between 1983 and 2002.                                                                                           
                                                                                                                                
Mr. Alcantra  stated that once inflation  and retirement expenses                                                               
are  deducted  from  the  total  $90  million  provided  by  this                                                               
legislation, only approximately $20  million would be provided to                                                               
classrooms. The  BSA amount proposed by  NEA/Alaska would provide                                                               
approximately $80 million to classrooms.                                                                                        
                                                                                                                                
10:18:04 AM                                                                                                                   
                                                                                                                                
Senator Stedman  asked whether  a K-12  calculation based  on the                                                               
maximum actuarial rate  had been conducted, as he  was curious as                                                               
to  how  much   funding  would  have  been   required  "today  to                                                               
neutralize the growth of the  liability". The liability increased                                                               
$1.2 billion this past fiscal year.                                                                                             
                                                                                                                                
10:18:40 AM                                                                                                                   
                                                                                                                                
Mr.  Alcantra   noted  his  recent   attendance  at   the  Alaska                                                               
Retirement  Management   Board  (ARM   Board)  meeting.   It  was                                                               
announced  during  that  meeting   that  $110  million  would  be                                                               
required for PERS and $98 million  would be required for TRS this                                                               
year. One  of the ARM  Board recommendations was to  "infuse $208                                                               
million" this year to address that need.                                                                                        
                                                                                                                                
10:19:12 AM                                                                                                                   
                                                                                                                                
Senator Stedman  understood therefore  that in order  to maintain                                                               
the status quo  and "to neutralize the  liability", an additional                                                               
$100  million beyond  the $90  million K-12  funding proposed  in                                                               
this legislation would be required.  "Part of the funding is paid                                                               
for by the local communities,  and wouldn't necessarily be picked                                                               
up by the State."                                                                                                               
                                                                                                                                
10:19:59 AM                                                                                                                   
                                                                                                                                
Mr.  Alcantra  affirmed the  total  PERS/TRS  liability would  be                                                               
approximately $180  to $200 million.  An addition of  $90 million                                                               
would  only  provide for  the  anticipated  TRS expense.  Of  the                                                               
11,400 active public school  employees represented by NEA/Alaska,                                                               
3,200 are support staff in  PERS' positions. Thus, there would be                                                               
both PERS and TRS expenses to address.                                                                                          
                                                                                                                                
10:20:34 AM                                                                                                                   
                                                                                                                                
Senator  Stedman  concluded therefore,  that  in  order to  drive                                                               
money  into   the  classroom,   additional  funding   beyond  the                                                               
additional  $100 million  required  to halt  the K-12  retirement                                                               
system liability from growing, would be required.                                                                               
                                                                                                                                
Senator  Stedman hoped  the Association  of Alaska  School Boards                                                               
was  "paying  attention" to  this  situation.  There is  a  "huge                                                               
capital draw coming at us and we  need help to fix it". He echoed                                                               
Co-Chair  Green's  earlier  warning  to  school  districts:  they                                                               
should not "rely on the State for 100 percent bailout…"                                                                         
                                                                                                                                
10:21:31 AM                                                                                                                   
                                                                                                                                
Senator  Bunde noted  another analyst  has  also indicated  there                                                               
would be  an additional $100  million cost  differential expense.                                                               
Therefore  $400  million would  be  required  to "truly"  provide                                                               
adequate  funding for  K-12 education  in  FY 07.  This could  be                                                               
accomplished provided other State  agencies' funding was reduced.                                                               
Referencing Mr.  Alcantra's remark about the  16 percent increase                                                               
in the Governor's FY 07 budget  over that of FY 06, Senator Bunde                                                               
pointed  out  that  were  the Governor's  budget  funded  in  its                                                               
entirety, "the State would be $50  million in debt this year" and                                                               
half a billion dollars next year.                                                                                               
                                                                                                                                
Senator  Bunde  identified  "the   one  constant"  communiqué  he                                                               
receives  from   constituents  as   "there  is  too   much  State                                                               
spending". Constituents  urge saving a portion  of the additional                                                               
oil revenue  the State has  received this  year as the  result of                                                               
record high  oil prices  rather than  spending it  and subjecting                                                               
the  State to  further budget  deficits  in the  future. To  that                                                               
point, he  is "still seeking  an adequate definition  of adequate                                                               
funding" for the level required  for "adequate funding" continues                                                               
to escalate.                                                                                                                    
                                                                                                                                
Senator  Hoffman noted  there  are good  things  on the  horizon;                                                               
specifically  the development  of legislation  that would  revise                                                               
the State's Petroleum Profit Tax  (PPT) formula. The proposed PPT                                                               
could  generate an  additional  $900 million  to  $2 billion.  An                                                               
additional $300 million "in real  dollars" could be realized were                                                               
the  PPT's effective  date made  retroactive to  March 30,  2006.                                                               
There are manners  "in the near future" through  which to address                                                               
some of the State's short and long term needs.                                                                                  
                                                                                                                                
10:24:52 AM                                                                                                                   
                                                                                                                                
MARY FRANCIS,  Executive Director,  Alaska Association  of School                                                               
Administrators,  appreciated the  increase in  the BSA;  however,                                                               
reported  that when  preliminary  budgets were  developed at  the                                                               
proposed BSA,  most districts found  it insufficient  to continue                                                               
the  positive  forward momentum  that  funding  levels in  recent                                                               
years  have  provided.  Therefore,  while  the  proposed  BSA  is                                                               
appreciated, a higher level would be desired.                                                                                   
                                                                                                                                
Senator  Bunde pointed  out  there  being 21  or  22 single  site                                                               
school  districts. Consolidating  some of  those districts  would                                                               
allow a reduction  in the number of  district superintendents and                                                               
other  expenses.  The salary  paid  to  support a  superintendent                                                               
could be used to hire two teachers.                                                                                             
                                                                                                                                
Senator  Bunde asked  Ms. Francis  whether the  Association might                                                               
support consolidating single site school districts.                                                                             
                                                                                                                                
10:26:52 AM                                                                                                                   
                                                                                                                                
Ms. Francis  shared that the  Association has, in the  past, been                                                               
opposed   to   school   district  consolidation;   however,   the                                                               
Association has  not addressed the issue  this year. Nonetheless,                                                               
the  Association is  supportive  of consolidating  administrative                                                               
services,   professional   staff,    and   sharing   professional                                                               
development programs.  Such action has occurred  in recent years.                                                               
She noted the Association's support  of SB 235-SCHOOL PERFORMANCE                                                               
BONUSES,  "as long  as the  money provided"  for that  program is                                                               
separate from the BSA funding.                                                                                                  
                                                                                                                                
Senator Bunde appreciated that support.                                                                                         
                                                                                                                                
10:27:59 AM                                                                                                                   
                                                                                                                                
ANDREA STORY,  Parent and Member,  Juneau School  Board, reminded                                                               
the Committee that the Juneau School  Board (JSB) is on record in                                                               
support of  increasing the  BSA to $5,552,  as the  $5,352 amount                                                               
proposed would  result in a  two million dollar reduction  to the                                                               
District. Increasing the BSA to  $5,552 would half that reduction                                                               
to one million dollars.                                                                                                         
                                                                                                                                
Ms. Story  noted that,  as a  parent and  an advocate  for public                                                               
school  students, she  has witnessed  "the impact"  State funding                                                               
has on schools.  School Boards must allocate  their funding based                                                               
on needs and  community input. The allocation of  funds "is often                                                               
a struggle  because costs have  increased more than  the revenues                                                               
that have  come in". An  additional minimum of $43  million would                                                               
assist in alleviating school district  budgetary concerns. She is                                                               
looking  to   the  Legislature  to   wisely  determine   how  the                                                               
additional revenue the  State has received as a  result of recent                                                               
high  oil  prices could  assist  school  funding. She  urged  the                                                               
Committee to increase school funding.                                                                                           
                                                                                                                                
10:31:16 AM                                                                                                                   
                                                                                                                                
Amendment 1:  This amendment changes the  base student allocation                                                               
from $5,352 to $5,380 in Section 1, page 1 line 6 of the bill.                                                                  
                                                                                                                                
Senator Hoffman moved for adoption of the amendment.                                                                            
                                                                                                                                
Co-Chair Green objected.                                                                                                        
                                                                                                                                
Senator Hoffman  characterized this  six million  dollar increase                                                               
to the  total BSA  as "a  modest increase"  in comparison  to the                                                               
levels suggested  by NEA/Alaska, the Juneau  School District, and                                                               
Alaska Kids Count. This minimal  amount would address some of the                                                               
concerns voiced by those entities and others.                                                                                   
                                                                                                                                
10:32:29 AM                                                                                                                   
                                                                                                                                
Co-Chair  Wilken spoke  against the  amendment, as  he considered                                                               
the $5,352 BSA  amount proposed by the Governor  and presented in                                                               
this  bill "generous".  The BSA  total amount  of $90  million is                                                               
appropriate.  Referring to  a similar  increase presented  in the                                                               
House of Representatives the previous  day, he pondered as to how                                                               
the  decision  to offer  this  six  million dollar  increase  was                                                               
derived. In other words, the  decision to increase the BSA should                                                               
be  based "on  knowledge and  a decision  that we  could defend".                                                               
Absent that, he could not support this amendment.                                                                               
                                                                                                                                
Senator  Stedman  also  spoke against  the  amendment.  While  he                                                               
"appreciated the desire" to provide  more funding for classrooms,                                                               
the issue should  be mindful of the large amount  of funding that                                                               
"would  be required  to bring  the  contribution rate  up to  the                                                               
actuarial calculated rate to stop  the liability growth". The $90                                                               
million  amount  proposed  in   this  legislation  would  address                                                               
approximately  half  of the  total  dollars  required for  public                                                               
education. "Going  forward, capping the growth  of that liability                                                               
will allow us to drive more money into the classrooms."                                                                         
                                                                                                                                
10:34:32 AM                                                                                                                   
                                                                                                                                
Senator Bunde noted  that, as part of the  budgetary process, the                                                               
Committee's  subcommittees  addressed   each  State  department's                                                               
needs and  required each department  "to justify  their spending"                                                               
and undergo reductions. The general  fund budget recently adopted                                                               
would be a 13 percent growth  over last year. "That's as large as                                                               
we  can  go."  Therefore,  before   he  could  support  providing                                                               
additional  money to  education, he  would require  knowing which                                                               
agency's  funding would  be  reduced.  Were increasing  education                                                               
desired, he could suggest a  few programs whose funding reduction                                                               
he could  support. Therefore,  this would  be likened  to robbing                                                               
Peter to pay Paul.                                                                                                              
                                                                                                                                
10:36:00 AM                                                                                                                   
                                                                                                                                
Senator  Olson spoke  in  support of  the  Amendment. Noting  the                                                               
comments  of  various testifiers  who  have  urged for  increased                                                               
education funding, proclaimed  "that we are in a  new era today".                                                               
This is "a digital age"  and various "outsourcing" endeavors have                                                               
occurred "due to  school's inability to keep up  with" the times.                                                               
The monetary  benefits the State  would receive by  the enactment                                                               
of  the proposed  Petroleum Profits  Tax (PPT)  legislation would                                                               
far  surpass  the six  million  dollars  in additional  education                                                               
funding this amendment would provide.                                                                                           
                                                                                                                                
10:38:00 AM                                                                                                                   
                                                                                                                                
Senator   Bunde   cautioned   against   funding   anything   with                                                               
anticipated  PPT revenue.  He  likened it  to  "buying a  lottery                                                               
ticket  and  then going  out  to  buy a  new  car  based on  your                                                               
potential earnings."                                                                                                            
                                                                                                                                
Senator Hoffman  stated he would  "buy a couple of  those lottery                                                               
tickets." Continuing, he noted  the Committee, including himself,                                                               
supported  increasing the  University of  Alaska's funding  by 14                                                               
percent this year.  That legislation is scheduled to  be heard by                                                               
the full Senate today, and he  would buy a lottery ticket on that                                                               
legislation being  approved. To that  point, he questioned  as to                                                               
why  K-12 funding  was not  increased  the same  percent as  that                                                               
provided  to the  University. After  all, not  everyone continues                                                               
their higher  education at the  University, but most  K-12 school                                                               
age children in  the State attend a public school.  Even with the                                                               
adoption  of this  amendment, the  percentage  increase for  K-12                                                               
"does not  even come close"  to that provided to  the University.                                                               
K-12  funding  should  receive "at  least"  the  same  percentage                                                               
increase  as  the  University. The  arguments  presented  against                                                               
increased K-12 funding "do not hold water".                                                                                     
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Hoffman and Senator Olson                                                                                     
                                                                                                                                
OPPOSED: Senator Bunde, Senator  Dyson, Senator Stedman, Co-Chair                                                               
Wilken and Co-Chair Green.                                                                                                      
                                                                                                                                
The motion FAILED (2-5)                                                                                                         
                                                                                                                                
Amendment #1 FAILED to be adopted.                                                                                              
                                                                                                                                
10:41:17 AM                                                                                                                   
                                                                                                                                
Co-Chair Wilken, the bill's sponsor,  observed that at times, the                                                               
perception is that "the glass  is half empty". However, he argued                                                               
the   "glass  is   really  half   full".   The  Legislature   has                                                               
accomplished many  things during the  past decade. In  1997, K-12                                                               
education  received  29.9 percent  of  the  State's general  fund                                                               
budget;  whereas  the  operating   budget  today  allocates  38.8                                                               
percent to  education. We  should be "proud"  of this  fact. This                                                               
equates to  a 30  percent increase in  education's "piece  of the                                                               
pie".  This  is  the  result  of  Legislators  understanding  the                                                               
importance of K-12 and citizens  advocating for it. The pie chart                                                               
depicts that  support. He suspected that  Legislative support for                                                               
K-12 would continue.                                                                                                            
                                                                                                                                
The bill was HELD in Committee.                                                                                                 
                                                                                                                                
                                                                                                                                
Co-Chair  Green  overviewed  the  Committee's  afternoon  meeting                                                               
schedule.                                                                                                                       
                                                                                                                                
AT EASE 10:43:51 AM / 10:43:53 AM                                                                                           
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Lyda Green adjourned the meeting at 10:44:02 AM.                                                                     

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