Legislature(1997 - 1998)

03/17/1997 09:03 AM Senate HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                         March 17, 1997                                        
                           9:03 a.m.                                           
  MEMBERS PRESENT                                                              
 Senator Gary Wilken, Chairman                                                 
 Senator Loren Leman, Vice Chairman                                            
 Senator Lyda Green                                                            
 Senator Jerry Ward                                                            
 Senator Johnny Ellis                                                          
  MEMBERS ABSENT                                                               
 All members present.                                                          
  OTHER MEMBERS PRESENT                                                        
 Senator John Torgerson                                                        
 Representative Allen Kemplen                                                  
  COMMITTEE CALENDAR                                                           
 SENATE JOINT RESOLUTION NO. 23                                                
 Urging the United States Congress to amend the Social Security Act            
 so that the higher cost of living in Alaska is reflected when the             
 per capita income of the state is used as a factor in determining             
 the federal share of Medicaid costs.                                          
  - MOVED SJR 23 OUT OF COMMITTEE                                              
 SENATE BILL NO. 36                                                            
 "An Act relating to transportation of public school students;                 
 relating to school construction grants; relating to the public                
 school foundation program and to local aid for education; and                 
 providing for an effective date."                                             
  - HEARD AND HELD                                                             
 SENATE BILL NO. 85                                                            
 "An Act relating to the public school funding program; repealing              
 the public school foundation program; relating to the definition of           
 school district, to the transportation of students, to school                 
 district layoff plans, to the special education service agency, to            
 the child care grant program, and to compulsory attendance in                 
 public schools; and providing for an effective date."                         
  - HEARD AND HELD                                                             
  PREVIOUS SENATE COMMITTEE ACTION                                             
 SJR 23 - No previous Senate action to record.                                 
 SB 36 - See Senate Health, Education & Social Services Committee              
         minutes dated 2/12/97 and 3/14/97.                                    
 SB 85 - See Senate Health, Education & Social Services Committee              
         minutes dated 2/19/97 and 3/14/97.                                    
  WITNESS REGISTER                                                             
 Karen Perdue, Commissioner                                                    
 Department of Health & Social Services                                        
 PO Box 110601                                                                 
 Juneau, Alaska 99801-0601                                                     
  POSITION STATEMENT:   Reviewed the need for SJR 23.                          
 Bob Labbe, Director                                                           
 Division of Medical Assistance                                                
 Department of Health & Social Services                                        
 PO Box 110660                                                                 
 Juneau, Alaska 99811-0660                                                     
  POSITION STATEMENT:   Discussed the FMAP.                                    
 Dennis Wetherell, Parent                                                      
 PO Box 514                                                                    
 Palmer, Alaska 99645                                                          
  POSITION STATEMENT:   Suggested that supplemental funding be raised          
                      to 25 percent and maintain the separate                  
                      funding categories.                                      
 Susan Stone, Parent                                                           
 PO Box 5891                                                                   
 Ketchikan, Alaska 99901                                                       
  POSITION STATEMENT:   Stressed the need to plan for the needs of             
                      Alaskan children.                                        
 Dan Beck, Acting Superintendent                                               
 Delta/Greely School District                                                  
 PO Box 527                                                                    
 Delta Junction, Alaska 99737                                                  
  POSITION STATEMENT:   Suggested that the school tax be extended to           
                      the entire state and that special education              
                      transportation be included.                              
 Syd Wright, retired Principal                                                 
 PO Box 624                                                                    
 Petersburg, Alaska 99833                                                      
  POSITION STATEMENT:   Stated that the basic problem, the failure to          
                      inflation proof the formula, was not being               
 Dr. Keith Tolzin, Superintendent                                              
 Ketchikan Gateway Borough School District                                     
 Pouch Z                                                                       
 Ketchikan, Alaska 99901                                                       
  POSITION STATEMENT:   Discussed the situation in Ketchikan.                  
 Lisa Bezenek, Parent                                                          
 PO Box 6464                                                                   
 Ketchikan, Alaska 99901                                                       
  POSITION STATEMENT:   Urged the committee to take a common sense             
 Richard Swarner, Executive Director                                           
 Kenai Peninsula Borough School District                                       
 148 N. Brinkley                                                               
 Soldotna, Alaska 99669                                                        
  POSITION STATEMENT:   Expressed concern with the funding community           
                      size, the cost factors, and the student count            
 Karen Eakes, President                                                        
 Ketchikan Education Association                                               
 636 Main Street                                                               
 Ketchikan, Alaska 99901                                                       
  POSITION STATEMENT:   Suggested that Alaska should use its wealth to         
                     fund education.                                           
 Mike Brown, Parent                                                            
 734 Monroe                                                                    
 Ketchikan, Alaska 99901                                                       
  POSITION STATEMENT:   Discussed the problems with the area cost              
 Karen Hanson-Pitcher                                                          
 PO Box 5642                                                                   
 Ketchikan, Alaska 99901                                                       
  POSITION STATEMENT:   Discussed the situation in Ketchikan.                  
 Forrest Olemaun, Board President                                              
 North Slope Borough School District                                           
 PO Box 169                                                                    
 Barrow, Alaska 99723                                                          
  POSITION STATEMENT:   Stated that the legislation before the                 
                      committee would devastate the children of the            
                      North Slope.                                             
 Tina Corwin, Member                                                           
 North Slope Borough School Board                                              
 PO Box 169                                                                    
 Barrow, Alaska 99723                                                          
  POSITION STATEMENT:   Discussed the situation in the North Slope.            
 LeLand Dishman, Superintendent                                                
 North Slope Borough School District                                           
 PO Box 169                                                                    
 Barrow, Alaska 99723                                                          
  POSITION STATEMENT:   Discussed the situation in the North Slope and         
                      suggested creating a committee to review                 
                      education funding.                                       
 Mike Aamodt, Vice President                                                   
 North Slope Borough Assembly                                                  
 PO Box 68                                                                     
 Barrow, Alaska 99723                                                          
  POSITION STATEMENT:   Discussed the situation in the North Slope and         
                      indicated the need to increase educational               
                      funding to all of Alaska.                                
 Carl Rose, Executive Director                                                 
 Alaska Association of School Boards                                           
 Juneau, Alaska                                                                
  POSITION STATEMENT:   Discussed the current foundation and problems          
                      with the proposal.                                       
 Kevin Ritchie                                                                 
 Alaska Municipal League                                                       
 Alaska Conference of Mayors                                                   
 217 Seward                                                                    
 Juneau, Alaska                                                                
  POSITION STATEMENT:   Discussed the municipalities as the other              
                      partner in education funding.                            
  ACTION NARRATIVE                                                             
  TAPE 97-26, SIDE A                                                           
         SJR 23 REFLECT AK. COLA IN FED MEDICAID SHARE                        
 Number 001                                                                    
  CHAIRMAN WILKEN  called the Senate Health, Education & Social                
 Services Committee (HES) to order at 9:03 a.m. and introduced                 
 SJR 23  as the first order of business before the committee.                  
  COMMISSIONER KAREN PERDUE , Department of Health & Social Services,          
 spoke in favor of SJR 23 which would support a change in the                  
 Federal Medical Assistance Percentage, the cost that the federal              
 government will share in the state's Medicaid program.  This has              
 been historically identified as an inequity. Currently, for every             
 $.50 the state spends, the federal government participates with               
 $.50 in the Medicaid program.  Commissioner Perdue explained that             
 the calculation is according to a formula based on per capita                 
 income in an individual state in relation to the per capita income            
 in the U.S.  Alaska has had exceptions to these calculations such             
 as the 125 percent poverty level of the federal level.  The FMAP              
 does not recognize the historic measures of change.  Alaska                   
 receives the lowest FMAP that can be received, 50 percent, as does            
 11 other states.  The highest FMAP is 77 percent.  Commissioner               
 Perdue said that the FMAP adjustment would result in a lot of money           
 for Alaska, $37 million for a one time adjustment to $39 million.             
 This inequity was identified during the federal Medicaid reform               
 last year by Senator Murkowski in the Finance Committee.  However,            
 the one time savings to Alaska was not realized due to the context            
 of the Medicaid cap, therefore the bill did not pass.  Commissioner           
 Perdue clarified that there are two issues:  the one time                     
 adjustment for the current spending and the perspective savings as            
 the state continues to invest money into Medicaid.  SJR 23 is                 
 consistent with Senator Murkowski's bill and should assist in                 
 addressing this inequity.                                                     
 Number 119                                                                    
  SENATOR LEMAN  pointed out that those percentages in the packet              
 specify how much higher the cost of living is in Alaska.  Senator             
 Leman thought that more than four Alaskan cities should be in the             
 20 highest cost areas.  Perhaps, that is because not many cities              
 are identified or is there a size cut off.                                    
  BOB LABBE , Director of the Division of Medical Assistance in DHSS,          
 said that those were just representative.  There is not an                    
 exhaustive list of all the cities and the comparisons.  Mr. Labbe             
 offered to provide the committee with a comparison of the price of            
 a loaf of bread in various cities in Alaska and the lower 48.                 
 Mr. Labbe pointed out that the calculation does change on an annual           
 basis.  Alaska is one of the few states that is at the floor                  
 percentage, 50 percent.  The actual dollars will not become                   
 apparent until the accountants do the calculations.  In the future,           
 some years will result in an increase and others a decrease.  Mr.             
 Labbe mentioned that this issue is a priority of the division who             
 supports this.                                                                
 Number 175                                                                    
  COMMISSIONER PERDUE  commented that this has been a priority for the         
 Governor, for herself and for Mr. Labbe.  She noted that many                 
 technical issues will come up.  Commissioner Perdue informed the              
 committee that several years ago the federal government said that             
 the department owed them $100 million in the upper limit which is             
 the difference between what the department pays rural hospitals and           
 nursing homes and what the Medicare upper limit was.  Currently,              
 there is an opportunity to get this done.  Commissioner Perdue                
 expressed the need to achieve this before becoming involved in the            
 continued Medicaid restructuring.                                             
  CHAIRMAN WILKEN  asked if it was important to know why there is a            
 difference between the federal percentages and the federal medical            
 assistance percentages in other states.   BOB LABBE  stated that the          
 federal percentages apply to some other federal programs as a                 
 result of the restructuring of the welfare reforms block grant.               
 Mr. Labbe said that the federal percentages column on the left is             
 what is being reviewed.  The importance of the federal medical                
 assistance percentage is that it varies.  Mr. Labbe was unsure that           
 Alaska would earn 50 percent based on the current formula.                    
  CHAIRMAN WILKEN  inquired as to which budget the savings would               
 surface if this were to happen.   COMMISSIONER PERDUE  did not                
 believe that this would happen within the next 60 days.  In further           
 response, Commissioner Perdue believed that this had a better than            
 50 percent chance to pass since this was taken up last year.                  
 Number 245                                                                    
  SENATOR LEMAN  said that he would support SJR 23 in order to support         
 equity in the program, however his support was not intended to                
 suggest the need for more federal involvement in welfare or                   
 Medicaid programs.  Senator Leman believed that decentralization              
 and movement away from federal involvement would be better.                   
  SENATOR GREEN  pointed out that testimony stated that Alaska and 10          
 other states are at the 50 percent level, but the packet                      
 information lists 16.   BOB LABBE  was not sure of the 10.  The list          
 will be effective in October.  Perhaps, some have dropped to the 50           
 percent level due to the improvement in the economy in the lower              
 48.  Mr. Labbe offered to check that.                                         
  CHAIRMAN WILKEN  said that he would entertain a motion to move               
 SJR 23 from committee.                                                        
  SENATOR LEMAN  moved to report SJR 23 out of committee with                  
 individual recommendations and the accompanying zero fiscal note.             
 Without objection, it was so ordered.                                         
  COMMISSIONER PERDUE  stated that more flexibility for the state              
 would be appreciated, but as Medicaid reform continues risk must              
 not be shifted to the state.  This is an entitlement program to               
 which the federal government has an obligation.  Care must be taken           
 in order to ensure that risk is not passed to the state.                      
                  SB  36 PUBLIC SCHOOL FUNDING                                
         SB  85 PUBLIC SCHOOL FUNDING/CHILD CARE GRANTS                        
 Number 302                                                                    
  CHAIRMAN WILKEN  announced that  SB 36  and  SB 85  would be the next        
 order of business.                                                            
  DENNIS WET  HERELL , parent, informed the committee that he was a            
 member of the 1993 Special Education Regulations Review Task Force.           
 Mr. Wetherell was relieved by the language in Section 15 of the CS            
 which reimburses districts for the cost of special education                  
 related transportation.  Mr. Wetherell expressed discomfort with              
 Section 14.17.420 on page 3 of the CS which provides for special              
 needs funding.  Under this provision, a total of 20 percent                   
 supplemental funding is available which is less than under the                
 current law.  Mr. Wetherell informed the committee that 14.5                  
 percent of students are special education students with                       
 disabilities and another 4.5 percent are gifted.  He suspected that           
 several percent each fall into the bilingual and vocational                   
 education category.  Under this proposal, 25 percent of the                   
 students are competing for 20 percent supplemental funding.  The              
 problem is further compounded because students with disabilities              
 are protected by federal law as is the money to educate those                 
 students.  Mr. Wetherell said that it was difficult if not                    
 impossible to reduce funding for students with disabilities.                  
 Therefore, 5.5 percent of the supplemental funding is left to be              
 split among 10-11 percent of the students.  Such a shortage will              
 pit parent against parent, program against program, and a loss of             
 services to all.  Mr. Wetherell requested that the special needs              
 funding factor be raised to 1.25 which can be accomplished without            
 change to the total state contribution to education if the base               
 student allocation is reduced to $3,640.                                      
 Number 348                                                                    
 Mr. Wetherell was uncomfortable with a single pot of supplemental             
 funding for all groups of special needs students.  The 1993 Task              
 Force discussed non-categorical funding in the context of students            
 with disabilities only, gifted education was kept separate because            
 it was not protected by federal law.  This separation was done so             
 as to provide parental leverage at the local level to ensure that             
 state education funds were spent on the purpose for which the funds           
 were allocated.  The 1993 Task Force did not consider bilingual and           
 vocational education because those categories do not fall under               
 special education law.  Mr. Wetherell requested that the three                
 funding categories for the various groups of special needs students           
 be restored.  Mr. Wetherell suggested that supplemental funding               
 grants in the amount of 14.5 percent for special education, 4.5 for           
 gifted education, 3 percent for vocational education, and 3 percent           
 for bilingual education.  This would result in a special needs                
 funding factor of 1.25.                                                       
 In response to Chairman Wilken,  DENNIS WETHERELL  said that his              
 reference to page 3 was regarding special needs funding not                   
 intensive services.  The 1993 Task Force reviewed intensive                   
 services as a separate funding category and the numbers of the task           
 force seem to be similar to those in paragraph (2) of Section                 
  CHAIRMAN WILKEN  inquired as to the source of the increase from 1.20         
 to 1.25.   DENNIS WETHERELL  reiterated that 14.5 percent of the              
 students have disabilities and 4.5 percent are gifted which totals            
 19 percent of the 20 percent allocation.  There are probably 3                
 percent or more in each category of the vocational or bilingual               
 categories.  Therefore, all the categories total 25 percent.  Mr.             
 Wetherell specified that his calculation was based on the average             
 number of students in each category statewide.  In further response           
 to Chairman Wilken, Mr. Wetherell clarified that the percentages              
 for special education and gifted students are a percentage of the             
 total ADM statewide, but the percentage for bilingual and                     
 vocational students was an approximation.                                     
  CHAIRMAN WILKEN  informed everyone that those numbers varied from 9-         
 70 percent of the total ADM depending on the district.  Each school           
 district would classify those categories and there was no auditing            
 of that.  Chairman Wilken said that it was confusing as to the                
 reason why some school districts had such a disproportionate amount           
 of students in those categories.  If this method continues, some              
 sort of auditing/verification would be required.                              
 Number 417                                                                    
  SUSAN STONE , parent, was concerned that each year's discussion of           
 bills on education leave problems unsolved and education less than            
 it was in the previous year.  She noted the inadequate amount of              
 money sent to Ketchikan which resulted in a divided community                 
 regarding how to spend the inadequate funds.  Ms. Stone informed              
 the committee she was educated in Alaska when Alaska's education              
 was the envy of others.  Ms. Stone discussed the losses in                    
 Ketchikan schools and the shame she felt with what is considered              
 adequate for Alaskan schools.  Parent groups are caught up in                 
 attempts to raise money rather than learning activities to enhance            
 the learning experience.  Ms. Stone expressed anger that                      
 Ketchikan's counselors leave the elementary schools when Ketchikan            
 is experiencing anguish over job losses to a significant part of              
 the community.                                                                
 Ms. Stone noted that the cost of living in Anchorage is lower than            
 that of Ketchikan.  Ms. Stone indicated the need to determine what            
 it realistically costs to run a school by reviewing the market                
 forces and educational requirements to determine the salary of                
 teachers.  Perhaps a standard reporting system could be devised in            
 order to review school statistics from across the state.  Ms. Stone           
 said that Alaska has not kept up in education.  She was glad to see           
 the proposed increase in standards, but there are not enough                  
 resources to do the job.  Ms. Stone informed the committee that she           
 attended school in Alaska before oil money and was mystified that             
 she had educational experiences that her children never had.  Ms.             
 Stone emphasized the need to plan for the needs of Alaskan                    
 children, not for what they can do without.                                   
 Number 472                                                                    
  DAN BECK , Acting Superintendent for the Delta/Greely School                 
 District, said that Ms. Stone had some good points.  Mr. Beck                 
 believed that the special needs factor would reduce some of the               
 reporting requirements for the vocational and gifted education                
 categories.  The Delta/Greely School District has an influx of                
 Russian and Eastern European students which results in a growing              
 bilingual population.  Mr. Beck said that the district could work             
 within any funding factor for special needs that the Legislature              
 determines adequate.  Holding transportation separate and removing            
 intensive needs from the special needs are both positive aspects of           
 the CS.  The school tax for REAAs is also a positive aspect of the            
 CS.  Mr. Beck suggested that the school tax be expanded to include            
 the entire state because as it stands seasonal employees are                  
 missed.  With regard to special education transportation, districts           
 currently cannot be reimbursed for transportation services for an             
 extended school year.  The extended school year is required by the            
 IAP and those costs are not reimbursable.                                     
  SYD WRIGHT , a retired Principal, informed the committee that he had         
 been an educator all of his life and mainly in Alaska.  Mr. Wright            
 referred to Alaska's poverty of spirit not resources, with regard             
 to education.  Mr. Wright identified the following improvements               
 under the two proposals:  counting students rather than units,                
 fixing area differentials, removing the cap, incorporating single             
 site funding, taxing unorganized boroughs, funding the Quality                
 Schools Initiative, and consolidating gifted and special education            
 classifications.  Those are worthwhile, but minor; schools will not           
 be significantly better.                                                      
 Mr. Wright noted that he had testified on the basic flaw of the               
 foundation program in 1988, 1991, and now.  Mr. Wright identified             
 the problem as the failure to inflation proof the formula.  In 10             
 years the foundation unit was increased once by 1.6 percent, during           
 the same period Alaska's cost of living increased about 30 percent.           
 Further the cost of college tuition has increased more than 300               
 percent and legislators increased their per diem by 50 percent                
 three years ago and seven percent last year.  During his time in              
 education, Mr. Wright said that he has observed the following:                
 significantly increased class size, indefinitely deferred                     
 maintenance of school buildings, loss of power to compete for the             
 best teachers, loss of some of the best experienced teachers due to           
 early retirement incentives, creation of hiring zero experience for           
 incoming teachers, loss of music, art and physical education in               
 elementary schools, reductions in the numbers of administrators               
 while expecting more teacher evaluation, loss of buying power for             
 technology, loss of electives in high school, and loss of air                 
 travel in Southeast for extra-curricular teams.  Mr. Wright                   
 informed the committee that the national publication Teacher                 
 Magazine graded all 50 states on the state's financial support of            
 schools in relation to the state's ability to pay - Alaska scored             
 an F.  In conclusion, Mr. Wright challenged the committee to put on           
 a mantle of leadership.                                                       
  CHAIRMAN WILKEN  requested that everyone on the network fax or mail          
 testimony to the committee.                                                   
 Number 553                                                                    
  DR. KEITH TOLZIN , Superintendent of Ketchikan Gateway Borough               
 School District, thanked Mr. Wright for his comments.  Dr. Tolzin             
 believed that the education tax, special needs and other non-                 
 categorical funding were positive aspects of the proposal.  Dr.               
 Tolzin reiterated the reductions experienced in Ketchikan, but                
 noted that the district has also attempted to create solutions to             
 bring spending in line with the available resources.  For instance            
 during bargaining with teachers this year, access to the Masters              
 column was limited.  Contracting the custodial services has also              
 been reviewed for possible savings.  Dr. Tolzin said that the                 
 district should not be reviewing such short-term solutions.                   
 Ketchikan believes that the area cost differential should be                  
 reviewed.  Dr. Tolzin urged the committee to attempt a study that             
 would be completed by January 1998 because districts cannot wait              
 two years.  Dr. Tolzin informed the committee that he was a                   
 proponent of the educational endowment, Alaska is not a poor state.           
 The tax, if extended statewide, could begin to fund such an                   
 endowment.  Dr. Tolzin echoed Mr. Beck's comment regarding taxing             
 seasonal employees.                                                           
  CHAIRMAN WILKEN  pointed out that page 14, lines 9-13 of the CS says         
 that the Department of Education must submit a report regarding the           
 student allocation based on the Consumer Price Index.                         
  TAPE 97-26, SIDE B                                                           
  SYD WRIGHT  said that made him feel better.                                  
  LISA BEZENEK , parent testifying from Ketchikan, agreed with Ms.             
 Stone's comments.  Ms. Bezenek was frustrated with the political              
 process and the children being lost through it all.  Ms. Bezenek              
 explained that her husband brought her to Alaska by expounding the            
 virtues of the educational system here.  There are wonderful                  
 teachers in Ketchikan, but the teachers are strapped.  Ms. Bezenek            
 urged the committee to return to common sense with education.                 
 Perhaps, starting fresh would be an option; determine the cost of             
 running a school with good programs and determine the amount of               
 state aid.  Ms. Bezenek informed the committee of the signatures              
 being compiled that illustrate Ketchikan's support for a better               
  CHAIRMAN WILKEN  noted that Ketchikan has been at the table during           
 each discussion and applauded its involvement.                                
 Number 545                                                                    
  RICHARD SWARNER , Executive Director for the Kenai Peninsula Borough         
 School District, believed that the CS is the best effort thus far             
 to deal with the formula.  The CS encompasses the following                   
 positive aspects:  the separation of the student transportation               
 costs, the provision that all districts contribute to education               
 funding, the funding of an area cost differential study, the                  
 concept of different area differentials for various funding                   
 communities, the 20 percent categorical funding, the separation of            
 the intensive needs funding, the removal of the local effort cap,             
 and the notion of reviewing the CPI or inflation costs for                    
 Mr. Swarner expressed concern with the funding community size                 
 factors.  He pointed out that with a funding community of 21-40               
 students a factor of 2.2 is applied and with 41-80 students a                 
 factor of 1.9 is applied.  That should be reviewed.  Also the cost            
 factors should be such that like communities have similar cost                
 factors.  Under Section 14.17.500, Mr. Swarner suggested that the             
 student count date be changed to November 15th.  Mr. Swarner said             
 that while it may be appropriate to remove the cap, the Legislature           
 must ensure that education is funded per the constitution.  Mr.               
 Swarner noted that the Kenai would submit written testimony.                  
 In response to Senator Green,  RICHARD SWARNER  supported taxation of         
 all districts.                                                                
  SENATOR TORGERSON  said that he was listening in via teleconference.         
 Number 478                                                                    
  KAREN EAKES , President of the Ketchikan Education Association,              
 commended the comments of Ms. Stone and Mr. Wright.  She informed             
 the committee that she was a 30 year resident of Ketchikan and a              
 teacher with 26 years of experience of which 21 have been in                  
 Ketchikan.  Ms. Eakes noted the lip service given to the importance           
 of education, however the actions are not consistent with those               
 words.  There has been a continual decline in educational services            
 in Ketchikan due to 10 years of flat funding, inflation, and                  
 inaccuracies in the local area cost differential.  Ms. Eakes                  
 reiterated that Ketchikan does not have librarians, nurses,                   
 counselors, daytime custodians, or a classroom instructional aid in           
 the elementary schools.  Ketchikan only has half-time music and               
 physical education in the elementary schools.  Ms. Eakes noted the            
 cuts at the middle school and high school level as well.  In total,           
 there have been some 50 staff cuts in Ketchikan over the past 10              
 years.  All educational staff are stretched to the limit.                     
 Furthermore, many of the buildings and playgrounds in Ketchikan are           
 inadequate and substandard.  The district's technology is minimal             
 and outdated, except at the high school.  Ms. Eakes urged the                 
 committee to support the hold harmless provision for the coming               
 school year.  The closure of the pulp mill accentuates an already             
 critical funding situation.  Ms. Eakes informed the committee that            
 the School Board is reviewing draft budget proposals that range in            
 cuts of $470,000 in the status quo to over $2 million in a 90                 
 percent funding situation.  Alaska is wealthy and it is time to use           
 that wealth to support and increase the educational funding.                  
  MIKE BROWN , parent, urged the committee to support the hold                 
 harmless provision for Ketchikan.  Mr. Brown noted that he had                
 submitted written comments to the committee last week.  Mr. Brown             
 said that Ketchikan and other communities have an area cost                   
 differential that does not reflect the cost of living of the area.            
 He did not believe that Ketchikan was being provided equal                    
 protection as specified in the Alaska Constitution.  Further, the             
 CS says that the area cost differentials will be legislated which             
 Mr. Brown believed would be a failure.  Mr. Brown suggested that              
 regulations should be enacted in order to provide the flexibility             
 to change the area cost differentials in regulation.                          
  CHAIRMAN WILKEN  thanked everyone on the teleconference network.             
  KAREN HANSON-PITCHER , 25 year resident of Ketchikan and parent,             
 echoed the concerns discussed by Ms. Eakes regarding the cuts in              
 programs and positions in Ketchikan.  The parents in Ketchikan have           
 been supportive and have attempted to provide what is eliminated              
 through the cuts.  Parents and businesses raise money for                     
 technological purchases for the schools, even so, much of the                 
 computer equipment available would be considered outdated.  Ms.               
 Hanson-Pitcher expressed the need to provide a basic education.               
 Ms. Hanson-Pitcher told the committee that her husband attended               
 school in Ketchikan before the oil money and had more programs than           
 their child does now.  Education in Ketchikan is eroding due to the           
 decrease in funding.                                                          
 Ms. Hanson-Pitcher understood the federal movement to be towards              
 equitable funding; making the funding in ghetto and inner city                
 schools equitable to the funding in affluent suburbs.  That seems             
 to be the intent of the state legislation as well, but that is not            
 what is happening.  The Ketchikan district is similar to the ghetto           
 schools down South as more funding is lost.  Alaska should be able            
 to do better.                                                                 
 Number 355                                                                    
  FORREST OLEMAUN , Board President of the North Slope Borough School          
 District, said that the legislation before the committee could have           
 a devastating affect and would infringe on the constitutional                 
 rights of the children of the North Slope.  Mr. Olemaun suggested             
 that when reviewing the foundation formula bills, the committee               
 consider recommending the appointment of a task force to evaluate             
 the facts and figures of the formula.  The task force should                  
 include legislative and DOE representation, school business                   
 managers, superintendents, educators, and individuals from all                
 parts of Alaska.                                                              
 Mr. Olemaun stressed that when considering this or any other                  
 formula the real issue, educating children, should not be                     
 forgotten.  The education system on the North Slope has almost                
 reached the ability to compete in the global market place.  Mr.               
 Olemaun reiterated that should this legislation pass, it would have           
 devastating results on the North Slope's educational resources;               
 "where would the Legislature go the next time they feel a need to             
 increase the revenue to their constituents."                                  
  SENATOR LEMAN  noted that this was his ninth legislative session and         
 much testimony has been taken on this issue over the years.  Why              
 would a task force with the make up Mr. Olemaun specified decide              
 upon a different conclusion or recommendation than the Legislature?           
  FORREST OLEMAUN  did not have an answer, but felt that if all the            
 facts and figures were provided to the people of Alaska the state             
 would be headed in the right direction for all children in Alaska.            
  SENATOR LEMAN  appreciated Mr. Olemaun's testimony as well as prior          
 testimony from the North Slope.  He also understood the impact                
 facing the North Slope Borough School District.  Senator Leman                
 ensured Mr. Olemaun that the committee would listen to those                  
 effected which is what is happening now.                                      
  SENATOR GREEN  mentioned that many present participated in a task            
 force two years ago which resulted in three plans being brought               
 forth.  All three plans were rejected.  Senator Green emphasized              
 that the CS is a starting point and now the focus should be on how            
 to make it better.  Senator Green commended the Chair on all his              
 Number 260                                                                    
  CHAIRMAN WILKEN  informed Mr. Olemaun that Fairbanks had a bond              
 issue in May 1996 which asked the people of the Fairbanks Northstar           
 Borough whether they wanted to build new schools by spending 100              
 percent of their own money, $64 million, or ask the state to pay 70           
 percent of that.  Some people tried to defeat the bond issue; one             
 of the issues brought forth was regarding equity.  How can                    
 Fairbanks be asked to spend money on schools when there are                   
 boroughs with a value four times greater with one-eighth of the               
 students who pay very little for education?  This is a place to               
 start.  Chairman Wilken hoped that Mr. Olemaun would appreciate his           
 problem of how children are educated in the Interior of Alaska.               
  TINA CORWIN , North Slope Borough School Board Member, said that any         
 of the foundation formula bills would devastate the North Slope,              
 especially when remembering when students were sent to schools in             
 other cities or states.  Ms. Corwin also recalled the plane crash             
 in 1971 in which several rural students were lost.  The children of           
 the North Slope deserve to receive an education at home with their            
 families.  Ms. Corwin informed the committee that the North Slope             
 Borough School District is one of the major employers in the                  
 villages.  The passage of any of the bills would impact the economy           
 of those villages which already have a low employment rate.  Ms.              
 Corwin pointed out that education costs on the North Slope are                
 expensive.  The North Slope would prefer to spend less money on               
 those things the urban areas take for granted.  Providing an                  
 education to urban students is much cheaper than in rural villages.           
 The North Slope has 10 schools in its district, and seven of those            
 can only be accessed by plane.  Ms. Corwin suggested working on the           
 formula together to help all Alaskan students.                                
  SENATOR LEMAN  was sorry for the loss of those students in the 1971          
 crash.  Senator Leman noted that the Mt. Edgecombe type education             
 has been a successful model and there is a waiting list of students           
 who want to participate.  He also agreed that educating students in           
 their own community is good.  Senator Leman suggested that the Mt.            
 Edgecombe type of education be reviewed in order to learn from it.            
 Number 153                                                                    
  TINA CORWIN  pointed out that it cost more for children to attend a          
 BIA school than to attend school in Barrow.  Ms. Corwin believed              
 that it cost $20,000 per student at Mt. Edgecombe.   SENATOR LEMAN            
 was not sure about those numbers and requested those numbers and              
 comparisons taking into account all the facilities.  Senator Leman            
 agreed that Mt. Edgecombe is expensive, but believed that it may              
 not be far more expensive than some of the communities.   TINA                
 CORWIN  agreed that it would range between different schools on the           
 North Slope.                                                                  
  SENATOR LEMAN  said that the Mt. Edgecombe school would not be for           
 everyone, but that opportunity should be provided.  A number of               
 leaders in Alaska were educated at Mt. Edgecombe.                             
  FORREST OLEMAUN  pointed out that any school would be successful if          
 allowed to limit the number of students in attendance as well as              
 picking those students.                                                       
  LELAND DISHMAN , Superintendent of the North Slope Borough School            
 District, commended the students from the North Slope that                    
 testified at the last meeting.  Those students were chosen at                 
 random and only had two hours notice.  Mr. Dishman stated that any            
 counsel from Mr. Wright would be beneficial.  Mr. Dishman informed            
 the committee that the North Slope district is about the size of              
 Michigan with a population of 2,550 students.  The district has 10            
 schools, three of which are located 300 air miles from Mr.                    
 Dishman's office.  Mr. Dishman feared that the students of the                
 North Slope would lose the opportunity to attend accredited schools           
 and receive an adequate education with the passage of this bill.              
 This loss would be ironic since Alaska is considering forcing all             
 of its schools to become accredited.  Mr. Dishman reiterated the              
 possible loss of jobs due to the passage of this bill which would             
 ultimately result in increases in public assistance and welfare               
 rolls statewide.  Further, the district's curriculum would be                 
 reduced and students would not have the opportunity to attend                 
 specialized classes which are preparation for work or college.  Mr.           
 Dishman said that these students would not have the chance to live            
 the American dream.                                                           
 Number 058                                                                    
 Mr. Dishman noted that one of the goals for Project 2000 is that              
 every child will enter school ready to learn by the year 2000.  The           
 national and state goals also indicate the need for students to be            
 able to use the technology to participate in the world market and             
 obtain admission to quality colleges.  Another national and state             
 goal is to improve parental involvement in the schools.  The                  
 passage of this bill would virtually eliminate all those goals,               
 isolating the students of the North Slope, and their parents would            
 be consumed with feeding the family by subsistence means.  Mr.                
 Dishman indicated that the board chairman had mentioned the                   
 possibility of the violation of the students of the North Slope's             
 constitutional rights, perhaps he meant their civil rights.  Even             
 rural students have rights protected by the constitution.                     
 In conclusion, Mr. Dishman emphasized that he supported equity,               
 however nothing is so inherently unequal as attempting to equalize            
 unequals.  Mr. Dishman suggested that a committee of urban and                
 rural experts in school finance, cost of living, economic                     
 viability, technology, and civility be created in order to develop            
 a plan that would fund education without dividing the state along             
 rural and urban lines.  Mr. Dishman suggested that everyone work              
 together to create quality education statewide.                               
  TAPE 97-27, SIDE A                                                           
  SENATOR WARD  said that there would not be such a committee.  He             
 suggested that Mr. Dishman determine what such a committee would              
 have developed as a fair and equitable solution and provide that to           
 the HESS committee.                                                           
 LELAND DISHMAN  pointed out that there has been much discussion               
 about some schools losing art, music, and physical education                  
 teachers.  The elementary schools on the North Slope do not have              
 such.  With regards to overcrowding, the Barrow schools has 25-30             
 students in a classroom and in the village schools one teacher has            
 15-18 students from four grades.  Mr. Dishman informed the                    
 committee that to have a school board meeting, noting the air                 
 travel involved, costs $20,000.                                               
 With regards to Chairman Wilken's predicament, Mr. Dishman pointed            
 out that Chairman Wilken was referring to capital project money and           
 equating it to foundation money; those two are not tied together.             
 Mr. Dishman understood the bond issue problem.  In every community            
 on the North Slope, the people voted schools as the number one                
 Number 044                                                                    
  SENATOR WARD  understood that education is the number one priority           
 for communities statewide.  Senator Ward reiterated the need for              
 Mr. Dishman to report his recommendations to the HESS committee               
 because no other committee will be created.                                   
  CHAIRMAN WILKEN  believed that everyone was aware of the high costs          
 in the North Slope.  With regards to Mr. Dishman's comments that              
 the passage of these bills would result in a decrease in funding              
 for the North Slope, Chairman Wilken asked Mr. Dishman if he had              
 given thought to how the North Slope Borough could participate more           
 to education.                                                                 
  LELAND DISHMAN  said that the North Slope is capped at 20 mills from         
 which the borough taxes at 18.50 and of that $60 million is capped            
 for operations.  For every $1 the state contributes, the North                
 Slope Borough contributes $3.  Mr. Dishman stressed that the money            
 received from the state would not operate Barrow High School and              
 the Polluck Elementary School.  Therefore, eight schools must be              
 operated from the funds of the North Slope Borough.  Mr. Dishman              
 informed the committee that the difference between what is taxed at           
 18.50 and 20 mills is surplus money that the oil companies have to            
 pay that goes to the state.  Mr. Dishman noted that he has sat on             
 many committees regarding education funding, every committee                  
 determined that there was a funding problem not a distribution                
  CHAIRMAN WILKEN  recommended that some thought be given to other             
 funding sources within the North Slope Borough.  With regards to              
 bonds, Chairman Wilken said that bonds are votes about dollars.               
 Bonds are a snapshot of the feeling on a particular issue.                    
 Chairman Wilken said that equity asks that citizens in the state              
 participate to pay for their own education to the extent that they            
 are able.  Able is defined by the assessed valuation of the                   
 organization.  Chairman Wilken said that was being requested from             
 all, including the North Slope Borough.                                       
 Number 162                                                                    
  MIKE AAMODT , Vice President of the North Slope Borough Assembly,            
 discussed how he came to be a resident of the North Slope Borough.            
 He is the owner of a small construction firm and since 1987 he has            
 been involved in retirement planning for various groups.  Mr.                 
 Aamodt informed the committee that he had reviewed the proposed               
 school district budgets each year since he began on the assembly in           
 1985.  Program elimination strips the children of the North Slope             
 of equitable educational opportunities and destroys employment                
 opportunities for residents.  In the current budget proposal the              
 district will provide a basic education comparable to that in the             
 urban areas, more than just the basics is necessary.  Intramural              
 sports, proms, clubs, etc. are important for children.  Mr. Aamodt            
 asked the committee if it could imagine children going to a high              
 school prom with 10 teenagers in the entire class; the North Slope            
 Borough School District combines several schools together.  Mr.               
 Aamodt mentioned that a bus cannot be taken across town, the state            
 has not tied towns in the North Slope with a road system as is the            
 case in other districts.                                                      
 Mr. Aamodt reiterated that the proposals before the committee would           
 place the North Slope Borough back to the time when either the BIA            
 or the state ran the schools.  Those systems were inadequate and              
 inequitable.  Mr. Aamodt discussed the time when he worked for the            
 state school system before the Borough took over.  There was not              
 enough paper for use in the classrooms, ice had to be brought in              
 from a lake 12 miles away in order to have water in school and                
 honey buckets were used.  During that time, two teachers attempted            
 to teach 10 subjects at four grade levels in high school.  Mr.                
 Aamodt stressed that was only 20 years ago.                                   
 Number 250                                                                    
 Mr. Aamodt discussed the district's goal of providing equity in               
 education and the Borough Assembly's support of education.  Funding           
 from the state level should be increased and standards should be              
 raised in the rural areas to the level of the North Slope in order            
 to come closer to those in urban areas.  The schools on the North             
 Slope are approaching what he and his wife experienced as high                
 schoolers more than 30 years ago when he and his wife graduated               
 from Anchorage schools.  The proposals before the committee                   
 resulting in a reduction in programs would destroy the basic                  
 economic fabric of the village economies.  Mr. Aamodt noted that              
 the district is attempting to replace certified people coming from            
 outside with permanent residents, however the separation previously           
 experienced creates difficulties in sending children away to                  
 college.  The North Slope is close to producing graduates not                 
 hampered by the memory of separation which would increase those               
 residents getting certified for school positions.  Mr. Aamodt                 
 reiterated that the schools provide a large portion of the                    
 employment in many communities which these proposals would                    
 Mr. Aamodt pointed out that the North Slope did not benefit from              
 oil revenue which went to the state in order to help municipalities           
 with their basic needs as well as to fund the permanent fund                  
 program.  The North Slope Borough was established to prevent the              
 continuation of inequality.  Mr. Aamodt discussed the high property           
 taxes in the North Slope.  In conclusion, Mr. Aamodt pointed out              
 that the state is mandated to provide education for Alaskan                   
 children.  The proposal ignores that responsibility for the North             
 Slope who is expected to provide 100 percent of the funding.                  
 Currently, the formula provides a portion of basic education and              
 the North Slope provides the rest.  Mr. Aamodt emphasized that                
 basic education is defined differently in urban areas and rural               
 areas.  Mr. Aamodt suggested that the committee increase funding              
 for all of Alaska, but not at the expense of a few districts.                 
 Furthermore, a permanent fund was developed in order to help the              
 state in times of decreasing resources.                                       
 Number 325                                                                    
  SENATOR LEMAN  commented that he could imagine a class with 10 teens         
 because he graduated with 16 students in Unalaska.  Senator Leman             
 also agreed that property taxes in the North Slope were high.  He             
 asked if a 2,000 square foot house close to $400,000 in value                 
 results in $200 per square foot.   MIKE AAMODT  explained that he             
 became an assembly member because of this issue.  Mr. Aamodt built            
 the house and acknowledged that if a contractor were hired the                
 house would have cost close to $200,000.  The house is $96,000 in             
 value, it is not worth $400,000.  When building a house in the                
 North, for every $1 spent on materials add another $1.5 for freight           
 on that material.                                                             
  SENATOR LEMAN  found it difficult to believe Mr. Aamodt's statement          
 that the North Slope did not benefit from oil revenue.   MIKE AAMODT          
 explained that the state receives royalty from the North Slope's              
 oil development.  The North Slope has the tax base which Mr. Aamodt           
 acknowledged as revenue, however it's not revenue that comes to the           
 state and is given back to the North Slope in the form of major               
 municipal assistance.  Mr. Aamodt said that the North Slope does              
 receive some assistance, but the state has not helped much with               
 water and sewer projects.  Revenues come to the state, the North              
 Slope Borough just assesses taxes.                                            
 Number 391                                                                    
  CARL ROSE , Executive Director of the Alaska Association of School           
 Boards, said that he would provide the committee with written                 
 testimony.  Mr. Rose said that he subscribed to Albert Einstein's             
 philosophy that "no problem can be solved by the same consciousness           
 that created it."  The foundation was not designed to survive 10              
 years of inadequate funding with a 30 percent loss in buying power.           
 Mr. Rose suggested that the foundation offset some of the down turn           
 in the economy in the 1980s in some of the municipalities.  The               
 foundation provided some needy municipalities with additional state           
 aid.  Now many of the municipalities have increased the property              
 value and as a result the foundation is working as designed; the              
 foundation is reducing state aid to those areas with increasing               
 property values.                                                              
 Mr. Rose clarified that equity is being defined in terms of                   
 population and how money should be distributed.  No proposals in              
 the last two years address the 30 percent loss in buying power.               
 The 39 districts which must be held harmless under this proposal              
 are evidence of not addressing that 30 percent loss in buying                 
 power.  Mr. Rose expressed concern that there have been goals                 
 stated, but there are no answers for the changes taking place.  He            
 echoed Mr. Wright's comment that there are some positive aspects,             
 but those only add up to a small percentage of the problem.  How is           
 the remaining money distributed minus the 30 percent loss in buying           
 power?  Mr. Rose said that the answer is 39 school district being             
 held harmless in the first year and over time the hold harmless               
 will be decreased and an increased local contribution through the             
 mill rate will balance that.  That moves toward a decreased state             
 contribution and an increased local contribution or an increase in            
 state mandates and a decreased state contribution and an increased            
 local contribution.  Mr. Rose stressed that the aforementioned                
 problem should be addressed.                                                  
 Number 445                                                                    
 Mr. Rose acknowledged some good in the proposal before the                    
 committee, but the simplicity is lost when the numbers are                    
 generated.  With regards to equity, for many equity is the status             
 quo and any departure from that creates problems which may                    
 encourage litigation.  Mr. Rose did not believe that the courts               
 should decide how to fund Alaska's schools.  He understood the                
 fiscal gap and the resources of the state.  The problems before the           
 state require an abundant way of thinking.  Mr. Rose said that                
 there are solutions to these problems, although those solutions may           
 not be politically palatable.  There is a scarcity mentality today,           
 there is not enough money which creates winners and losers, and               
 haves and have-nots.  Mr. Rose encouraged the committee to review             
 how to place Alaskans in a position to be viable to the economy and           
 the future.  Mr. Rose offered to work with the committee.                     
  SENATOR LEMAN  encouraged Mr. Rose to review why costs are high and          
 determine how to provide a service at a less cost.                            
  CHAIRMAN WILKEN  said that one of the definitions of equity is the           
 ability of a district to pay for its education.  He inquired as to            
 Mr. Rose's definition of equity.   CARL ROSE  explained that for many         
 districts what it currently receives is reality.  A departure from            
 that would raise serious questions.  Requiring everyone to pay for            
 education is a good move, however that does not equate to the                 
 actual numbers that get run.                                                  
  CHAIRMAN WILKEN  stated that it was enlightening to read the Mat-Su          
 decision by Justice Rebenowitz.  That decision seemed to say that             
 there is no equal protection clause for education under the Alaska            
 Constitution.  How education is funded is a majoritarian issue that           
 must be dealt with through the Legislature which is occurring now.            
 Number 495                                                                    
  KEVIN RITCHIE , Alaska Municipal League and the Alaska Conference of         
 Mayors, noted that municipalities are the state's other partner in            
 funding education.  Currently, the State of Alaska funds about 75             
 percent of the cost of education and municipalities fund about 25             
 percent.  Over the past years, the amount the municipalities                  
 contribute has increased substantially.  Mr. Ritchie stressed that            
 this is a state and municipal issue.  He thanked Chairman Wilken              
 for committing to talk with the Alaska Municipal League and the               
 Conference of Mayors on April 1.  Mr. Ritchie passed out some                 
 information to the committee which illustrated that municipalities            
 face the same lack of resources as the state.  The chart                      
 illustrated that there was a significant decline in revenues to the           
 state in 1986, there was a decrease in the state contribution.                
 Over the next three years up until 1992, the state contribution was           
 brought to the level of 1986.  During that same time, there were              
 significant cuts in services in municipal schools but there was               
 also a significant increase in local contribution to schools.  The            
 state's contribution flattened out after 1992 which accounts for              
 the 30 percent loss in buying power.  Mr. Ritchie pointed out that            
 the gap is being filled by municipal governments and that increase            
 is unlikely to continue.                                                      
 The next graph illustrates the funding of schools in 1996 with 1986           
 dollars.  Municipalities have not totally offset the loss of                  
 purchasing power which is a result of the resources in communities.           
 Mr. Ritchie said that municipalities and school districts have done           
 much to create efficiency in programs, but both have also had to              
 cut programs and staff.  The last chart of the handout reviews                
 trends in municipalities in general.  Mr. Ritchie explained that              
 the property tax issue has to do with the relationship between the            
 state and municipalities.  Mr. Ritchie acknowledged the work of               
 some of the legislators in dealing with problems the municipalities           
 have.  The Conference of Mayors and the Municipal League have the             
 same perspective as the state.  Mr. Ritchie said that the basic               
 goal, providing basic education, should be the determinant of                 
 whether the allocation process is fair or not.                                
  SENATOR LEMAN  asked Mr. Ritchie if he could use the same time               
 periods used in his charts to determine the actual state dollars              
 versus municipal dollars as well as the federal component.                    
  TAPE 97-27, SIDE B                                                           
   CHAIRMAN WILKEN  thanked everyone for the testimony.  Chairman              
 Wilken said that he would take the committee's lead regarding the             
 pending course.  The bill will be before the committee again on               
 Wednesday.  There being no further business before the committee,             
 the meeting was adjourned at 11:25 a.m.                                       

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