Legislature(2003 - 2004)
02/19/2003 01:30 PM Senate HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JT. SENATE AND HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES
STANDING COMMITTEES
HOUSE SPECIAL COMMITTEE ON EDUCATION
February 19, 2003
1:30 p.m.
TAPE(S) 03-2, 3, 4
SENATE HESS MEMBERS PRESENT
Senator Fred Dyson, Chair
Senator Lyda Green
Senator Gary Wilken
Senator Bettye Davis
Senator Gretchen Guess
SENATE HESS MEMBERS ABSENT
All members present
HOUSE HESS MEMBERS PRESENT
Representative Peggy Wilson, Chair
Representative Carl Gatto
Representative Paul Seaton
Representative Kelly Wolf
Representative Sharon Cissna
Representative Mary Kapsner
HOUSE HESS MEMBERS ABSENT
Representative Cheryll Heinze
HOUSE SPECIAL COMMITTEE ON EDUCATION MEMBERS PRESENT
Representative Carl Gatto, Chair
Representative Paul Seaton
Representative John Coghill
Representative Peggy Wilson
Representative Kelly Wolf
Representative Mary Kapsner
HOUSE SPECIAL COMMITTEE ON EDUCATION MEMBERS ABSENT
Representative Les Gara
OTHER LEGISLATIVE MEMBERS PRESENT
Senator Con Bunde
Senator Kim Elton
Senator Robin Taylor
Representative Mike Hawker
Representative Carl Moses
COMMITTEE CALENDAR
^OVERVIEW: Alaska School District Cost Study
Mr. Jay Chambers, American Institute for Research
WITNESS REGISTER
Mr. John Walsh
Northwest Arctic School District
Ms. Amy Lujan
Nome Public Schools
PO Box 131
Nome AK 99762
Mr. John Torgerson
PO Box 1068
Kasilof AK 99610
Ms. Elizabeth Frances
Southwest Region Schools
PO Box 90
Dillingham AK 99567
SUMMARY OF INFORMATION
TAPE 03-2, SIDE A [SENATE HES TAPE]
CHAIR FRED DYSON convened the meeting of the Jt. Senate and
House Health, Education and Social Services and House Special
Committee on Education at 1:30 p.m. and invited Senator
Therriault to relate the events that led to the "School District
Cost Study."
SENATOR GENE THERRIAULT handed out a time-line of events that
led to Legislative Budget and Audit contracting $350,000 for a
study on school district cost factors. The only factor that was
not included was the school lunch program, because it is
federally funded.
SENATOR THERRIAULT explained that there were two respondents to
the request for proposal (RFP), the American Institute of
Research (AIR) and Information Insights-Fairbanks. AIR was not
the low bidder, but their proposal was much more comprehensive
and it was chosen. Two groups were put together to assist the
study, one of school district business officers that interacted
with AIR and the other an oversight committee comprised of
Representative Fate, himself (Senator Therriault), Eddy Jeans
from the Department of Education, Pat Davidson from Legislative
Audit and David Teal from Legislative Finance. They made sure
the consultant was getting access to information he felt they
needed.
As chairman of Budget and Audit, Senator Therriault said he was
very protective of the consultants so the school districts
couldn't pressure them to use certain numbers or do the study
any particular way. The first time he saw the information was a
draft report in November when the oversight committee met with
AIR for two days in Anchorage along with the other (ALASBO)
committee members. There were some concerns over anomalies in
the data and the consultant was asked to make sure the district
information was reported consistently in the survey instruments
that were used to gather the information. The report was brought
to Budget and Audit in early January.
CHAIR DYSON said he understood that the contractor had produced
the study and it had been accepted, so the legislature had no
role in accepting the document.
SENATOR THERRIAULT replied that was right and it was up to the
legislature to make a policy call on whether or how to implement
the findings of the study. AS 14.74.60(b) has a full page of the
cost factors as they exist now.
SENATOR CON BUNDE said that the methodology of the study was
done on district cost factors and some people have suggested
that district need should have been used instead. He asked
Senator Therriault to explain why cost factors was chosen.
SENATOR THERRIAULT replied that districts needed another way of
saying adequacy and the appropriation language says to look at
the cost factors. The consultant was not supposed to give the
legislature a read on whether he thought the funding
appropriated by them each year was adequate. He was to answer a
specific question - if you only had a dollar to spend, how would
you equalize the purchasing power around the geographic areas in
the state.
REPRESENTATIVE MARY KAPSNER said one of the criticisms she heard
was that certain school districts benefited under the study.
SENATOR THERRIAULT responded that at the November meeting, he
realized the two Alaska Association of School Business Officials
(ALASBO) presidents he invited represented two districts that
were suggested to get an increase. This was not knowledge he had
before they were invited and the reason he invited the one, is
because he was the outgoing president.
I don't believe they had any ability to steer the
consultant beforehand nor did they have any ability to
steer the consultant afterwards. It's just when we all
got in a room and we opened up the report, we all
looked at the numbers at the same time, basically,
they were suggested for an increase.
1:50 p.m.
MR. JAY CHAMBERS, American Institute of Research consultant,
joined the committee and said that he had two team members on
line, Lori Taylor and Joe Robinson, to help answer questions. He
said that this undertaking was complex, especially because it
was in Alaska where there are dramatic differences in diversity
that do not exist in the same way in the Lower 48. His institute
was here 20 years ago and did extensive traveling at that time
and that benefited their ability to conduct this study. The
study required a collaborative approach to get a better
understanding of the factors that are faced by the diverse
school districts around the state.
The technical working group (TWG) was made up of eight school
business officers who were intended to be representative of the
type of districts that exist in the state. It consisted of Kerry
Jarrell of Bering Strait SD, Michael Fisher of Fairbanks North
Star Borough School District (SD), Melody Douglas of Kenai
Peninsula SD, Dave Jones of Kodiak Island Borough SD, Dennis
Niedermeyer of Lake and Peninsula Borough SD, Lucienne Harger of
North Slope Borough SD, Barbara Stocker of the Sitka Borough DS,
and Karen Goodwin of Southeast Island SD. Melody Douglas and
Dave Jones provided help to the AIR as well.
MR. CHAMBERS said that no one study could ever completely
capture 100 percent of the variations in costs. "It's just too
complex...."
They worked at getting the big picture across the diversity of
school districts within the state. The technical oversight
committee helped review the data collection instruments and AIR
tried to design instruments that would get the information that
they needed to conduct their study. There are three major
factors that affect the cost of education - pupil needs, scale
of operations and the price of comparable resources. This study
focuses on the third - the geographic cost of education index
(GCEI). He said that the study that AIR did early in 1984 dealt
with all three.
MR. CHAMBERS stated the basic question they are asking is how
much more or less does it cost to recruit and employ comparable
school inputs across geographic locations within the state of
Alaska. School inputs are teachers, administrators, various
categories of noncertificated personnel, energy services,
instructional materials and travel. He noted that AIR
subcontracted with a group of engineers who helped them with the
energy component of the study. The [GCEI] Index is on page 4 of
the Summary and ranges from a low of 0.99 in Mat-Su to a high of
1.58 in the North Slope Borough. This means that the highest
cost school district requires about 58% more resources than
Anchorage to provide comparable school inputs. The high-cost
areas are the far North and the southwest districts and the
lower-cost areas are the interior and the southeast islands.
There is still quite a bit of variation within the regions due
to geographic factors.
He explained that the next slide showed a comparison of the
current Alaska cost index done previously by the McDowell Group
and the new AIR geographic cost index. The McDowell Group
focused heavily on existing patterns of spending and AIR's
approach tried to identify differences in prices for comparable
resources. This method is comparable to the one used by the
Bureau of Labor Statistics in trying to identify differences in
the cost of living over time in the United States or the
Consumer Price Index (CPI).
2:07 p.m.
Personnel expenditures are the biggest portion of school
district budgets. In the Lower 48, this ranges from the high 70
- mid 80%. In the State of Alaska, there are many other factors
- energy, transportation, and travel costs - that reduce that to
some degree in some of the remote areas. There are some
districts that spend less than 50% on personnel, but those are
exceptions. Most of the districts spend 65 - 80% of their
budgets on personnel.
AIR's approach was to use econometric models. They started by
understanding the full range of factors that affect the
variation in wages and those include two basic collections of
factors, discretionary factors and cost factors. The
discretionary factors are where there is a choice of experience,
education levels, the colleges personnel come from, etc. The
cost factors are all the other things that impact variations in
wages - the factors that underlie differences in the cost of
living in different geographic regions or labor market
conditions, amenities, access to shopping and cultural
facilities. There is also the ability and willingness for people
to work in different locations throughout the state.
MR. CHAMBERS said to some degree the same factors that affect
the labor markets for teachers and school administrators affect
the labor markets for all other occupations within a region. "So
this is not unique to education."
The analysis focused on three categories of personnel, full-time
teachers, other certificated personnel, and classified workers.
His slide indicated the various categories the study used. They
tried to predict the salary that would have existed in various
districts using a simulated person who captured all the factors
that affect wages in the statistical analysis. That number
became a predicted salary for a certain area and that became the
personnel cost index. The next slide illustrated patterns in
variation of the index with the far north and southwest being
the highest in average cost. He also provided a table that
showed the variations in the mean index for personnel by
distance from the nearest center of commerce.
In the Lower 48, the vast majority of students and school
districts are within 50 - 80 miles of city centers, but that's
not true of many school districts in Alaska. Their numbers show
that higher wages will have to be paid to attract teachers to
those remote areas of the state.
2:17 p.m.
MR. CHAMBERS said the energy budget takes up less than 5% of
budgets in the Lower 48 and sometimes less than 1 - 2%. That is
not the case in Alaska where up to 23% of the budget has been
allocated to energy costs. The methodology they used includes an
engineering component and building a set of prototypes to try to
determine energy consumption levels and the price of various
sources of energy services. They tried to remove the local
choice from the analysis as much as possible. This was very
difficult to do because there just weren't enough sample
observations. Therefore, their approach was to take a
prototypical building or buildings that functions similar to the
type of buildings that exist in Alaska and simulated moving
those buildings to the different climate zones within the state.
TAPE 03-2, SIDE B
The engineers worked with the TWG and staff to come up with the
prototype. Variations in energy costs are associated with
climatic differences, the price of fuels transported to the
locations where they are going to be used and the prototype
differences associated with the efficiency of alternative fuel
sources. The kinds of things they would not be able to control
easily in an analysis are the operating hours, the differences
in efficiencies in the different buildings, configuration of
heating and thermostatic settings and fuel source used.
They used three prototypes - the moderate, cold, and very cold -
and considered school buildings, district office buildings, and
out buildings. Data was collected through the district surveys
on the price of energy services from each school site including
transportation and storage costs. Those prices were converted
into constant units so they could be applied to the engineering
models. The far north and the southwest were the highest on
average, but all the index numbers for providing energy services
in Alaska were high relative to Anchorage.
MR. CHAMBERS said the scope of using the cost of all goods would
have been too big for this project's budget and the TWG helped
them come up with a couple of goods they felt were
representative - paper and a specific sized window pane. The
issue was to get some idea of how much more money different
districts pay for those kinds of items and to identify their
transportation costs. They also included the alternative prices
if the most efficient method wasn't available. Those were costed
at each sight and the numbers were aggregated to the district
level to calculate a final index, which shows that the smaller
districts tend to have somewhat higher costs associated with
their inability to take advantage of large scale purchasing and
with the fact that they tend to be located in more remote areas.
MR. CHAMBERS said they included contracted services associated
with maintenance and operations, professional development and
travel between the schools and district offices associated with
administrative oversight, some professional development and
itinerant services.
Our goal was not so much to try to determine how much
those expenditures should be, but rather to try to
reflect the relative differences in the prices of
different kinds of travel between these different
locations faced by school districts.
MR. CHAMBERS emphasized that AIR worked closely with the TWG to
develop a reasonable approach to measuring travel costs from
each school sight to Anchorage.
Ultimately to create the overall geographic cost of
education index, we had to take the personnel
components, the goods components, the travel
components and the energy components and aggregate
them into a single index in much the same way that the
Bureau of Labor Statistics does to try to aggregate
the consumer price index (CPI) into a single index
that reflects over time what the differences are in
the price of living.
He explained that the methodology they used is called the
superlative index, which is different than the market basket
approach. Many years ago the CPI used a fixed market basket
index, which took a basket of goods like shelter, food and
transportation, etc., and fixed their costs and then followed
what happened to those costs as the price of the goods changed.
They could just as well have reversed the process in time to see
how prices have changed.
The problem is in the real world as the relative
prices of various goods change, people make
substitutions. The cost of coffee goes up relative to
tea, I start drinking more tea....The same thing
happens with respect to school districts...
The two indices will surround the true index, one too low and
one too high. There is no way to get at the actual number, but
the superlative index takes an average of the two numbers
between two geographic differences, in this instance. In Alaska
the price differences are so dramatic that they needed to
understand the potential impact of substitutions on the way they
employ the inputs.
MR. CHAMBERS said that implementing the new index couldn't be
done overnight without causing major disruption to the school
districts. He counseled the lawmakers to phase it in over a
period of five years since it didn't need to be updated more
than every five years.
He also thought that although Alaska had a good personnel
database, the linkage between the certification files and the
current personnel data system could be improved. While they are
currently linked, only one is available electronically. He also
recommended that they adopt a database for non-certified
personnel like the one used for certified personnel. The state
could adopt regular data collection on some of the non-personnel
components like energy prices and cost of goods, as well. Once
these systems were in place, studies could be made much more
cheaply and accurately. Finally, he recommended that they have
professional economists do the studies.
2:43 p.m.
CHAIR DYSON turned the gavel over to the Chair of House HESS
Committee, Peggy Wilson.
CHAIR WILSON asked if there were any questions from the
committee.
SENATOR DYSON asked if the most current data used in all areas,
since it seemed that enrollment numbers were used from FY 2000
and the cost numbers were from FY 2002.
MR. CHAMBERS replied that they used the most recent data
available whenever possible. Personnel data was used up through
the 2001-2002 school year.
MR. CHAMBERS explained that the enrollment data was used from
schools and aggregated to the district. He said that Eddy Jeans
had the ability to put in new data so legislators could use
different numbers. He felt that the impact of changing one
enrollment figure from 2000 or 2002 would have miniscule impact
on the index.
MR. JOE ROBINSON, AIR on-line consultant, added that their data
was provided by the Department of Education.
CHAIR WILSON asked Mr. Chambers to respond to the legislators'
two pages of printed questions and began by asking if he would
analyze the cases of considerable cost discrepancies between
school districts in the same geographic regions.
MR. CHAMBERS replied that would require him looking at each of
the districts, which would go beyond their time to address.
Those are some of the kinds of things they tried to address in
the draft report at the November meeting. AIR was assured that
the data they received from the districts were accurate at that
time.
CHAIR WILSON asked when they saw the discrepancies between close
geographic sights, did they address those at the time.
MR. CHAMBERS replied, yes, and that is when they double-checked
the data from the school districts and census that was used for
the personnel data, but found only minor adjustments. They
decided to implement an improved methodology for the energy
component by looking at a more continuous variation in the
impact of climatic differences on energy costs than they had in
the original study. This is because of the situation she just
described where a couple of districts that were adjacent to one
another, Haines and Skagway, had indices that were quite
different from one another and logic suggested that they
shouldn't be.
MR. ROBINSON added, "Everything was checked and doubled checked
again - not only by us, but by the officials at the ALASBO
Conference themselves...."
SENATOR GUESS asked if they changed the methodology on any other
part of the cost indice at the November meeting.
MR. CHAMBERS replied they just changed the energy methodology.
SENATOR GUESS asked if there was any written explanation of why
or how they changed it.
MR. CHAMBERS clarified that it would be better to say that the
methodology was refined. Originally, three different building
prototypes were used - mild, cold and very cold. They were able
to calculate three points of energy requirements based on that.
In the earlier model, they assigned one of those three points to
the districts based on the climate. In the new one what
distinguishes a mild from a cold to a very cold are the number
of heating degree days.
They fall within ranges - lots of heating degree days
versus small, relatively. The refined methodology
tried to provide interpolations of the data between
those two points. We drew a line between prototype one
and prototype two and the districts that fell in terms
of heating degree days, between those two points were
placed at a point between them rather than just
selecting one or the other depending on the climate
zone that they were in...Every district had its own
climate zone.
REPRESENTATIVE GATTO said he disagreed with Mr. Chambers'
statement that the real world is much more complex than any
econometric model. Some of their data indicated a huge disparity
in numbers from districts that were very close and that made him
suspicious of the model. All of the questions on data, which
might refer to how it was collected, become irrelevant if the
model is faulty.
MR. CHAMBERS responded:
The model is intended to reflect patterns, if you're
talking about personnel, for example, because we did
not use an econometric model to estimate the price of
energy. We simply asked what do you pay per unit per
kilowatt-hour, per btu or some unit that we could
translate into that. The only place we used
econometric models was the personnel analysis and we
didn't use econometric models for energy primarily
because we didn't think we could really control for
variations in the choices made by school districts. We
did try to use econometric models for personnel
because we felt that was the only systematic way that
we had of factoring out the discretionary components
for salaries and to isolate the cost factor.
TAPE 03-3, SIDE A
SENATOR DYSON said that "slavishly going down the list [of
questions] is not the best strategy" and that they wouldn't get
all their answers today. Dr. Chambers wasn't prepared to answer
some of the detailed ones. He asked if getting answers to
questions in writing was outside the contract.
MR. CHAMBERS said it was outside the contract, but arrangements
could be make to provide them with answers.
SENATOR GREEN said she was disappointed that this wasn't a two
or three day meeting since so many people were visiting from
other districts with questions.
SENATOR DYSON explained that the committee had asked for
questions three weeks ago, but they were very slow coming in.
3:10 p.m.
SENATOR DAVIS said since the legislature was the body that would
have to implement anything in the study, she wanted to know if
the Department of Education and school districts could get a
full report from Mr. Chambers staff. She asked if he had talked
to any school district people.
MR. CHAMBERS replied that he met with the technical working
group and oversight committee, but he wasn't asked to speak with
anyone else.
SENATOR DAVIS said she wanted legislators to have access to AIR
to better understand the study.
MR. CHAMBERS said he would have to operate within the contract
they currently have, but if the state wanted to amend the
contract, he would provide whatever explanation and support is
necessary.
SENATOR TAYLOR said he couldn't understand why the City of Sitka
isn't buying all of their supplies through Wrangell because they
would save 100%. He also said the study indicates it would be
19% cheaper to travel in and out of Petersburg than it is to
travel in and out of Juneau. That would be great news to his
people because they pay a lot more than that right now.
MR. CHAMBERS said he could answer that question in detail, but
he would need the time to dig into the data. He thought that
Senator Taylor misrepresented that part of the study by
simplifying it the way he did. He asked Senator Taylor to give
him a list of districts he is concerned with to see what drives
that particular index and he would provide information on them.
The reason the study used windowpane and paper as proxies to get
at travel costs is because they worked with the school business
officers to try and select some items they felt were
representative. Supplies and materials represent a relatively
small percentage of school district budgets.
You could spend a lot of money on a project like this
focusing on things that take up a very small
percentage of the total school district budget and get
a more precise estimate or you can focus your
attention on the areas where there are big differences
- and the big differences are in personnel and energy
- yes transportation and travel are important
components. I think we represented those numbers and I
feel fairly confident that the approach that we took
is a reasonable one given the relative percentages of
expenditures that go to these components...
SENATOR GUESS said she didn't have any real difficulty with the
methodology, but there were some things that puzzled her. One is
the use of just the general fund expenditures as weights, given
the amount of federal funds that impact certain districts and
other types of grants that districts get.
I think if we're trying to get at the purpose of the
entire costs differences, then I would think that we
need to look at the entire budget versus just a part
of the budget even though it is a significant part.
MR. CHAMBERS said that was a good question and they had pondered
it.
There is no reason why one could not expand the scope
of the budget weights to include, if the state chose
to do so, to include those other components, because
they are not trivial....We discussed this with the
oversight committee...
MR. CHAMBERS explained that the data has two matrices. One is
labeled as the operating budget, but the legislature calls it
the general fund budget and the other includes some of the
federal funds. "There is no reason why, if the state chose to do
so, that those weights could not be adjusted to reflect all of
the components."
SENATOR GUESS asked if the data is available.
MR. CHAMBERS replied, "Those are data that come right from the
Alaska Department of Early Education Development."
REPRESENTATIVE KAPSNER asked Mr. Chambers what forum would be
better for him to go into some of the details. One concern was
use of a prototype for the energy portion because many of the
schools in rural Alaska do not even come close to the prototype.
"A lot of them were built by the Bureau of Indian Affairs in the
1950s and it's not an adequate reflection of a lot of Alaska."
MR. CHAMBERS said he is willing to provide additional
information and answer additional questions, but that would be
beyond the scope of the contract. They would have to develop an
addendum to continue. He informed them that their engineers
looked at and talked to folks in the state of Alaska about using
different prototypes for buildings that were built prior to
1985.
MR. ROBINSON elaborated that the engineers determined that 1984
was the breaking point for building efficient school buildings.
Due to the willingness of Anchorage and another
advantage was that the size of the school district
provided us with a large enough in to find whether
there was a statistically significant difference in
energy utilization of buildings before 1984 and those
after 1984. Our analysis found that there was no
significant difference - not at any measurable level -
of significance between building that were built prior
to that break point date and those that were built
after it...
REPRESENTATIVE KAPSNER said a lot of her schools and school
districts would disagree.
CHAIR WILSON elaborated that Representative Kapsner's school
buildings actually have holes in the floors and missing
insulation. There are huge differences across the state because
buildings have not been maintained the way they should.
MR. CHAMBERS said he was very sympathetic with what she
described and that the legislature could decide to make capital
investments so that buildings could be more energy efficient. A
study of the type she was talking about would cost $1 million,
not $350,000. As an alternative, he said, the legislature could
say that as a state they accept whatever the school districts
are spending on energy and improve the recording system in such
a way to come up with that number.
He said that they worked very hard on this study and he cared
about his integrity and the quality of work that he does.
I do this because I like what I do and think it's
interesting and it provides good public policy. I'm
not saying we're always right. We do the best we can.
I take a bit of exception when - and not everybody has
treated us this way - but when we just get treated off
hand and kind of dismissed. I think what we've done is
important and all we have to do is ask the teachers,
would you be willing to go anywhere in the state for
the same wage. I think you'll get your answer if you
ever do that...We've got to devise systematic ways of
providing and addressing the very important issues,
but you have to address all of them. You've got to
address the adequacy issues, the needs, the scale of
operations, the geographic cost differences and you've
got to do what most states don't do and that is
separate or begin to think together about capital
facilities and educational services. We fund them
differently like they're separable...when, in fact, it
affects very deeply the way we serve children with
disabilities.
SENATOR DYSON pointed out that some districts had spent money on
creating energy efficient systems and would be penalized in the
future. He said that some of the anomalies like Senator Taylor
pointed out on the transportation costs "jump off the pages at
us and make us wonder, as Representative Gatto tried to say,
what went wrong..."
He said the highest wages in the state are paid in the North
Slope Borough and asked if the studies' figures were based on
people who made the money there or people who resided and worked
there.
MS. TAYLOR, AIR on-line consultant, answered that the analysis
of comparable occupational wages outside of education were based
on a database that describes compensation at the point of
employment, not the residence.
SENATOR GUESS asked if those statistics were available.
MS. TAYLOR replied no, the data is collected from the employer.
REPRESENTATIVE PUAL SEATON said since they had identified
teachers' wages as the biggest component of the entire model and
that tenured teachers' wages are outside of the control of the
district because those teachers can't be fired, how was that
captured in the model. He asked if he was missing something.
MS. TAYLOR replied that the comparable wage index adjusted for
occupational differences across different parts of Alaska. It
will compare the wages of motorcycle mechanics to the wages of
motorboat mechanics and note where they are higher for the kind
of job. It does not correct for the demographics of the specific
individual involved, such as the years of experience or the
degree that is held.
Education is a field in which you get a lot of range
of skill among the individuals who are teaching...that
influences their salaries. The analysis for the salary
index corrects for those demographics. The analysis of
the comparable wage index or the average wage cannot
correct for those demographics...
REPRESENTATIVE SEATON observed if the difference in wages beyond
the control of the individual districts is not captured, the
cost to the district might be higher than the cost differential
would show.
MS. TAYLOR replied that with the personnel indices they tried to
predict the wages of a typical educator in each district by
moving that same individual to different parts of the state. It
does not correct variations in the individuals or the mix of
skills a district has currently.
REPRESENTATIVE SEATON said it seemed that the district could be
committed to paying higher costs in wages than the model would
indicate they would have funding for.
MR. CHAMBERS replied that was true for the way they had applied
the model, but in general, school districts have the ability
over time to make adjustments in distribution of experience and
qualifications of their staff, but sudden changes, like
declining enrollment, make it difficult for districts to make
those kinds of adjustments in the short term. Some states have
included it as a component in the cost factors, but he thought
it was better keeping those things as options. After three
years, about half of the staff has turned over or about 14-15%
per year.
MS. TAYLOR agreed.
SENATOR GREEN said if a district made every effort to trim costs
and had done aggressive contracting for the high dollar items
and was an actively growing district with commuters for the bulk
of their population, that the model is so badly skewed that a
teacher salary increase wouldn't show up.
MR. CHAMBERS responded that he thought she was talking about
wages outside of education and wanted to be clear about their
analysis.
The comparable wages became an explanatory factor - an
independent variable, if you will - a cost factor in
the analysis of teacher wages. Ultimately, the
personnel indices that we estimated for you come from
a wage analysis of variations in teachers, school
administrators and school classified personnel. In
turn, each of those were related to a set of cost
factors among which was this comparable wage index. So
the comparable wage index is only one factor as part
of a list of cost factors that affect the wages of
teachers. It's not the only factor. It is an important
factor, but it is only one of a number of factors.
There are other factors that are more closely aligned
with the districts...
MS. TAYLOR agreed. She added that the comparable wage index was
across all occupations for full-time employees.
SENATOR GREEN said her question still goes back to the district
whose data places them very high in the comparable wage category
because of contract negotiations that took place subsequent to
this data collection.
MR. CHAMBERS replied that those are the kinds of things that one
would have to consider in future updates. The numbers reflect
not just districts, but patterns that are part of the labor
markets throughout the state of Alaska. This question was asked
in Dade County, Florida and he artificially increased the wages
by 5% over everybody else and reran the numbers.
The impact of that was that the district would have
lost money doing that relative to the cost index,
because there was no way, even increasing the largest
district - Dade County is one of the top four
districts in the country in terms of size...the impact
on the index was less than 1%. The impact on the index
didn't happen is what I'm trying to tell you. There
are a lot things that would happen as a result of the
increase in wages in a given district over time.
SENATOR GREEN reiterated that the way comparisons were done some
people were having trouble believing the report.
SENATOR BUNDE said it looked like if one district raises its
wages and another doesn't, that wouldn't be reflected at all.
MR. CHAMBERS explained, "The benefits to the districts would be
far less than any relaxation or otherwise as a result of the
negotiation process."
SENATOR BUNDE assumed that districts would be impacted
negatively where there barter, instead of money was used.
MR. CHAMBERS replied that it wouldn't be reflected in anything
they had done.
MS. TAYLOR responded that she thought the issue comes back to
the comparable wage index.
TAPE 03-3, SIDE B
MS. TAYLOR said in general if a particular line of work leads to
off-the-books transactions, it would probably do that in much of
the state and, therefore, wouldn't be a problem. It would only
be a problem where a community is prone to do that.
SENATOR BUNDE said one of the problems is of some people working
in one area and living in another and that it's difficult to
report that data because of privacy issues. He wanted to know if
they could access that data and how challenging that would be.
MS. TAYLOR responded that this study was done with community
averages for finely detailed levels of occupations. They didn't
have information about specific individuals outside of the
educator files they were provided for the study. It would take
an act by the legislature to get them access to that kind of
data and it would be a major analysis.
SENATOR BUNDE said she used wages from people who work on the
North Slope in the oil industry, but then she said they don't
have access to that data.
MS. TAYLOR explained everything is adjusted for occupations.
Folks who don't work in the energy industry will get paid more
for cutting hair in the North Slope Borough than in Anchorage,
because it's a tough place to live. The differential is what is
used to peg the comparable wage in North Slope, not the fact
that energy workers are paid so very well there. "Energy workers
are only compared to other energy workers."
SENATOR BUNDE said it was his understanding that people in
Wasilla can live more cheaply because they are not factoring in
that folks work in Anchorage rather than Wasilla. He asked if
that was accurate.
MS. TAYLOR said that all of their data described location
according to where folks worked. They have no information about
where anybody lives.
SENATOR BUNDE thought that would skew the study.
MR. CHAMBERS added that Mat-Su has a personnel index of .98 and
Anchorage is 1.0 and that difference is not statistically
significant, because standard error is applied.
CHAIR PEGGY WILSON said that 1 percent is a big difference to
Alaskan school districts.
MR. CHAMBERS agreed and he wasn't saying to ignore that, but he
wanted them to know that the study was attempting to show the
big picture.
CHAIR WILSON said that she would turn the gavel over the
Representative Gatto for the next portion of the meeting.
4:03 p.m.
REPRESENTATIVE CARL GATTO, Chair, House Special Committee on
Education, asked if anyone had questions.
MS. AMY LUJAN, Nome Public Schools, said she felt there were
problems with the energy component because of the differences
statewide. She also observed that different wage scales can
affect a district's ability to sell positions to provide
adequate education for students.
MS. TAYLOR explained that the model is based on the philosophy
that districts that can pay well have tended to be able to pick
and choose among the people they hire. The consequences of that
situation affect the mix of skills amongst the people they hire.
Having an index that controls all the observable characteristics
of the personnel allows them to strip out that historical
affluence. The variations in compensation are related to
location and not to qualifications of individuals.
MR. JOHN TORGERSON said he had technical questions that he
wanted the committee to forward to Mr. Chambers and asked if the
numbers in the study had been rounded off.
MR. CHAMBERS replied that the numbers were rounded off to the
nearest two digits.
MR. TORGERSON asked if all the models were run on the
methodology rather than actual figures.
MR. CHAMBERS replied that they used their proposed methodology.
MR. TORGERSON asked if a working model was available to the
public so they could add their own variables to see what the
results might be.
MR. CHAMBERS replied that he could change the variables, but the
model wasn't designed to handle all combinations of variables.
SENATOR TORGERSON said he was considering using actuals for
energy, for instance.
MR. CHAMBERS said he could substitute that number into the model
if he wanted to, but doing that is outside the current scope of
the contract.
MS. ELIZABETH FRANCES, Southwest Region Schools, said some
districts use waste heat for energy and asked if the study took
that into account. Also, the study indicated that Dillingham
generates its own electricity, but it never has.
MR. ROBINSON replied that Dillingham is the only district that
reported using waste heat. There was no equalization for waste
heat. They didn't have the lowest index value for energy either.
They used the information that was reported to them on the
district surveys.
SENATOR WILKEN directed Mr. Chambers to V of the Summary where
it says, "The largest differences are most likely attributable
to methodological differences underlying the two studies'
calculation..." and asked what the two or three of the
differences.
MR. CHAMBERS replied that they were not charged with providing a
review of the McDowell study, which was an analysis of actual
spending as opposed to looking at differences in the prices of
individual inputs.
4:30 p.m.
SENATOR GUESS asked if the superlative approach was better than
a market-basket approach if a district has high energy costs,
but prefers to spend more money on teacher salaries.
MR. CHAMBERS said that would lead to the issue of adequacy and
in the study 20 years ago, they tried to develop an appropriate
delivery system by reflecting spending patterns that were
reasonable for the district that they served. A superlative
index is a compromise between basing the weights on the actual
district or Anchorage. A fixed market basket approach would have
Anchorage as a base.
SENATOR WILKEN said that the 1983-84 study was an effort to try
to establish adequacy, but there was no report.
MR. CHAMBERS differed and said that a very detailed report was
submitted to Larraine Glenn in the Department of Education.
REPRESENTATIVE SEATON said he thought road access would be an
important component.
MS. TAYLOR responded that going into the study they thought road
access would have a lot of power to explain variations in
salary, but it didn't. The comparable wage index was probably
picking up enough of the variations so that inclusion of a
measure for road access only added noise to the model.
REPRESENTATIVE SEATON said if they presume that the study is
accurate and that it identifies districts with higher costs that
haven't been included in the current budget, a phase-in of 20%
per year means that those districts that are paying the higher
cost are not going to receive compensation for what they are
actually paying. He asked Mr. Chambers to comment on that.
MR. CHAMBERS said that deserves to be clarified and one of the
major reasons for phase-in is:
...I don't think you could adjust a district's budget
down by 5 or 10% and expect them to be able to respond
to it in a reasonable way. This would be a crisis for
that district. So, I would never want to put a
district in that position. That doesn't prevent you
from, however, from saying we're going to hold
harmless or phase in over time those districts that
have lost index value and go ahead and implement the
index value on the other side of that.
SENATOR GUESS said she found it interesting that poverty was not
on the list especially given the relationship they know between
poverty and learning. She asked if they looked at that issue.
MS. TAYLOR responded:
...While poverty tends to add to the needs of
individual students, it also tends to be more common
in low cost of living areas such that it's very
difficult to disentangle that part of student need
that might make the job more difficult for teachers
that would get translated into an expectation of
higher wages from the fact of using a statewide notion
of poverty tends to mean you observe more poverty in
low cost of living areas which would tend to imply
lower wages for teachers. In some of the models it
cancelled out and in other models the result was
perverse. The notion that where there was high poverty
that the cost of living component seemed to dominate
and you got a prediction that salaries would be lower
where there is greater poverty and I didn't find that
plausible.
SENATOR GUESS asked how the difference in shipping costs
affected the study.
TAPE 03-4, SIDE A
MR. CHAMBERS explained there were enormous differences in
shipping costs within the same community.
...We asked the question - by the most primary method
by which you got this item to the school, what price
did you pay for that item and what was the
transportation cost implicit in that item. Then we
asked in those instances where you did have to make
the judgment that you're describing and purchase
something immediately, what was the price that you
would have paid by an alternative method of
transportation and what percentage of the time do you
think you use that alternative method of
transportation. So, for example, if you 90% of the
time did it by barge and 10% of the time you had it
flown in, we would have rated the two different prices
90/10 to reflect that over-all difference. We had to
ask each district that question about each of the
items. That made it a little more complex as you can
imagine.
CHAIR GATTO said he was startled to find that in Pelican, items
come in by floatplane.
MR. CHAMBERS elaborated that this was an area where the study
could be improved over time. He thought one could build in a
number of different kinds of items to address the question that
Senator Guess just raised and also to try to get districts to
answer those questions in a very compatible and better way over
time to improve the quality of that component of the index. "I
would definitely think that is something that is very doable."
CHAIR GATTO said one last concern was motivation and if he knew
what was going on in this study, he might try to skew the
figures he reported. He asked Mr. Chambers if he relied on his
numbers rather than someone's casual answer to that question.
MR. CHAMBERS said that he just gave the best explanation of why
they did the energy cost they way they did it. He would expect
that people would try to do the best they could for their
districts. He said it would be extremely difficult for people to
manipulate facts.
SENATOR GUESS asked him to discuss the process that determined
what the center of commerce was.
MR. CHAMBERS said he would give her a list, but that basically
they used distance as the determining factor.
REPRESENTATIVE WILSON said in a lot of areas the kind of window
that is being transported makes a big difference, because
sometimes it weighs twice as much. She asked if districts were
asked those specifics.
MR. ROBINSON replied that the districts were asked to provide
information on the typical window that they would get. The study
group didn't want to burden the respondents with specific times.
REPRESENTATIVE WILSON asked if one of the questions used was
what it would cost to get a gallon of bleach.
MR. ROBINSON replied yes.
REPRESENTATIVE WILSON said some people would consider that a
hazardous product and would send it a certain way and others
would just go to the grocery store and buy it. She asked if they
quantified that.
MR. ROBINSON replied that they put hazardous materials on the
survey and some clearly said they could just go to the store and
buy some bleach. He pointed out that that question was not
actually used anywhere in calculating any index values.
MR. CHAMBERS added that heating oil could be a hazardous
material.
REPRESENTATIVE WILSON said that the report says the highest cost
districts pay on the average about 29% more than Anchorage while
low cost districts pay about 7% less. This sounds as if the
personnel costs are based on what districts are actually
currently spending adjusted to show everyone hiring comparable
personnel. She asked if that was right.
MS. TAYLOR replied that was correct for the most part.
The report used what they were currently spending
adjusted for the personnel mix, but it's the part of
what they're currently spending that is systematically
related to the school and environmental factors
presented in exhibit 3-2 on page 18.
MR. CHAMBERS clarified that those are cost differences as
opposed to just pure average wage differences.
REPRESENTATIVE WILSON asked if the energy cost differences were
for a model building.
MR. CHAMBERS said that was correct.
REPRESENTATIVE WILSON asked why personnel costs were based on
what school districts are paying, but energy costs use a model
building and adjust for climatic zones.
MR. CHAMBERS explained:
The personnel component tried to use the statistical
modeling to examine the labor market variations. In
other words, we used a statistical model to do the
analysis for us. The energy model - there is no
comparable personnel alternative to the energy model.
The energy model I could have used in an econometric
model where the dependent variable instead of being
teacher wages was expenditures per pupil for energy.
And on the right hand side of the equation, the cost
factors, if you will, would have been heating degree
days or factors reflected in the climate. I could have
done that. I chose not to do that because higher
heating degree days means higher relative costs. Those
higher relative costs may cause me to spend less on
energy through other means....I didn't feel we had
adequate controls. The problem is in an economic model
or a statistic model the cost factor variables might
be capturing choices that the districts are making and
not just purely cost factors and I feel in the
personnel case, we have a reasonable way to control
for those...whereas in the energy analysis I didn't
see any reasonable way of controlling for those
factors.
REPRESENTATIVE WILSON said she heard him say that they wanted to
use statistical information, not reality.
MR. CHAMBERS clarified:
Statistical information is a reflection of the reality
of the labor markets. For energy we were trying to
create a reasonable representation of the school
buildings recognizing the comments that we made
earlier about the limitations of that. I wanted to
pick up the gross differences in energy costs
associated with climate and with the prices they were
paying for energy services and try to take out of that
the choices that districts are making to spend more or
less because of operating hours or the way they set
their thermostats or issues like that.
CHAIR DYSON recapped what he thought there was consensus for the
committee to do and since folks did not do a good job of getting
their questions in by the deadline, he respectfully asked them
to get their questions to Representative Gatto who would get
them collated and back to Mr. Chambers.
MR. CHAMBERS said he would like to respond to very specific
questions.
CHAIR DYSON adjourned the meeting at 5:05 p.m.
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