Legislature(1997 - 1998)

12/02/1997 07:00 PM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
        TOWN MEETING ON SCHOOL FUNDING REFORM                                  
      SENATE HEALTH, EDUCATION AND SOCIAL SERVICES COMMITTEE                   
                     SENATE FINANCE COMMITTEE                                  
                           Fairbanks AK                                        
                         December 2, 1997                                      
                            7:00 P.M.                                          
                                                                               
SENATE HESS MEMBERS PRESENT                                                    
                                                                               
Senator Gary Wilken, Chairman                                                  
Senator Loren Leman, Vice Chairman                                             
Senator Jerry Ward                                                             
                                                                               
SENATE HESS MEMBERS ABSENT                                                     
                                                                               
Senator Lyda Green                                                             
Senator Johnny Ellis                                                           
                                                                               
SENATE FINANCE MEMBERS PRESENT                                                 
                                                                               
Senator John Torgerson                                                         
Senator Al Adams                                                               
                                                                               
SENATE FINANCE MEMBERS ABSENT                                                  
                                                                               
Senator Drue Pearce, Co-Chairman                                               
Senator Bert Sharp, Co-Chairman                                                
Senator Dave Donley                                                            
Senator Sean Parnell                                                           
Senator Randy Phillips                                                         
                                                                               
ALSO IN ATTENDANCE                                                             
                                                                               
Senator Mike Miller                                                            
Representative Al Vezey                                                        
                                                                               
COMMITTEE CALENDAR                                                             
                                                                               
TOWN MEETING ON PUBLIC SCHOOL FUNDING                                          
                                                                               
OTHER TOWN MEETINGS ON PUBLIC SCHOOL FUNDING                                   
                                                                               
Ketchikan - 11/12/97                                                           
Anchorage - 11/13/97                                                           
Wasilla -11/18/97                                                              
Soldotna - 11/19/97                                                            
                                                                               
WITNESS REGISTER                                                               
                                                                               
Mr. Bob Shefchik, Assistant Superintendent                                     
Business and Finance - Fairbanks                                               
578 Canoro Rd.                                                                 
Fairbanks AK 99707                                                             
                                                                               
Mr. Donald Stein                                                               
105 Dunbar                                                                     
Fairbanks AK 99707                                                             
                                                                               
Ms. Bonnie Williams                                                            
P.O. Box 82812                                                                 
Fairbanks AK 99708                                                             
                                                                               
Mr. Rich Seifert                                                               
1196 Pilot Dr.                                                                 
Fairbanks AK 99707                                                             
                                                                               
Ms. Meg Nordale, President                                                     
Fairbanks Council of PTAs                                                      
P.O.Box 60043                                                                  
Fairbanks AK 99706                                                             
                                                                               
Ms. Fredi Buffmeir                                                             
Alaska Association of Elementary School Principals                             
900 Lathrop                                                                    
Fairbanks AK 99701                                                             
                                                                               
Mr. Andre Lorell, President                                                    
Alaska Association of Secondary School Principals                              
Fairbanks AK 99701                                                             
                                                                               
Mr. Scott Calder                                                               
P.O. Box 75011                                                                 
Fairbanks AK 99707                                                             
                                                                               
Mr. Cole Sonefrank                                                             
P.O. Box 178                                                                   
Ester AK 99725                                                                 
                                                                               
Ms. Jodi Olmstead                                                              
P.O. Box 56873                                                                 
North Pole AK 99705                                                            
                                                                               
Ms. Nancy Webb                                                                 
469 Panorama Dr.                                                               
Fairbanks AK 99701                                                             
                                                                               
Mrs. Cam Carlson                                                               
P.O. Box 80234                                                                 
College AK 99708                                                               
                                                                               
ACTION NARRATIVE                                                               
                                                                               
TAPE 97-59, SIDE A                                                             
                                                                               
CHAIRMAN WILKEN called the Joint Senate Health, Education and                  
Social Services and Finance Committee meeting to order at 7:00 p.m.            
and announced they would discuss school foundation formula funding             
reform.  He said there is an effort on behalf of the majority to do            
something about the way the State funds public schools.                        
                                                                               
        SB 30 MANDATORY INCORPORATION OF CERTAIN BOROUGHS                      
                  SB 36  PUBLIC SCHOOL FUNDING                                 
          SB 142  REGIONAL EDUCATIONAL ATTENDANCE AREAS                        
          SB 146 PUBLIC SCHOOL FUNDING/CHILD CARE GRANTS                       
        SB 193  ADMINISTRATIVE SPENDING LIMIT FOR SCHOOLS                      
                                                                               
SENATOR ADAMS said he would like to be able to give the minority's             
comments on these bills when they were finished explaining them.               
                                                                               
SENATOR MILLER welcomed everyone and said he and Senator Adams were            
in the legislature when the formula was written.                               
                                                                               
SENATOR WARD welcomed everyone and said he was part of the                     
legislature that wrote the formula also, and they have now found               
that it doesn't work and he's very interested in hearing their                 
comments.                                                                      
                                                                               
SENATOR LEMAN said he was glad they were working with this issue               
because most of them agree that the present foundation formula is              
inequitable.  The point of disagreement seems to be in the                     
interpretation of what is equitable.  He also thought that everyone            
needed to pay something in terms of a local share towards the cost             
of education.  People in Fairbanks do that, but some people don't.             
He felt this was important because when people invest directly in              
education, they will care more about what's coming from it.  He is             
as concerned with the outcome of education as he is with the costs             
and equity of the foundation formula.  He believed this a way to               
improve education.  He thought it was also important that whatever             
they come up with fits within phase 3 of their long term financial             
plan.                                                                          
                                                                               
CHAIRMAN WILKEN recognized Mr. Bob Shefchick, Chief Financial                  
Officer, North Star Borough School District and Ms. Cynthia Henry,             
City School Board Member.  He said a number of principals were also            
attending.  He also recognized North Star Borough Assembly members:            
Mr. Cole Sonefrank, Mr. Mike Young, and representing the mayor, Ms.            
Nadine Winters.                                                                
                                                                               
SENATOR TORGERSON welcomed everyone and said his parents                       
homesteaded the Fairbanks Airport.  He said the Legislative Budget             
and Audit Committee had awarded the contract for the area/cost                 
differential study, adding that they have all said one of the                  
stumbling blocks to changing the formula was determining if the                
area/cost differential was up to 1998 standards.  This will be                 
presented to the legislature in January.                                       
                                                                               
He explained that the last time the formula was rewritten it was               
done by Representative Swackhammer about 10 or 11 years ago.  It               
was going to be the fix of all fixes because they were in the same             
position we are in today of dissatisfaction with how the money is              
being distributed.  It would probably still be a good formula if               
there hadn't been some federal changes, some mandates on the                   
education system, and most directly, the disparity the federal                 
government put on us because we recognize PL874 funds sending                  
several school districts into a tail spin.                                     
                                                                               
SB 30, he explained, would have continued to form the State into               
boroughs, the main purpose for which was taxation and education.               
This would get education down to the local level and away from                 
State government.  Our Constitution basically says the State will              
be divided into boroughs.  In 1991 the Local Boundary Commission               
completed a report and SB 30 adopts the boundaries in that report.             
If areas vote to become boroughs, they fall into existing statutes             
taking the restriction off of being a third class borough (where               
the assembly sits as the school board also).  If an area decides               
not to form a borough, the one thing it couldn't do was pay for                
education.  The Department of Community and Regional Affairs would             
then have meetings throughout the affected areas and decide off a              
menu of different taxation measures what they would do to meet                 
their equivalency requirement to assessed valuation.  Sales tax,               
property tax, hotel tax, fish tax, are options to a property tax.              
Senator Wilken's bill proposes a gross payroll tax which is the                
cheapest way to collect that equivalency because there is no                   
bureaucracy to go with it.                                                     
                                                                               
He said there was opposition to the mandatory boroughs because                 
people felt government was being forced on them and he hasn't                  
pushed it very hard.  He has introduced also SB 142 which does a               
lot of the same things, but doesn't require a vote; it just adopts             
the model borough boundary sections.                                           
                                                                               
SENATOR TORGERSON informed the committee that 92% of all people in             
the State pay a local effort of some nature and they receive 70% of            
the pie.  The 8% that aren't required to pay anything receive the              
balance.  This is to him a major inequity.                                     
                                                                               
SB 193 is the administrative cap bill, he explained.  It says if we            
can use the foundation formula and use the area/cost differential              
on that, and if that' good enough to educate our kids,  it should              
be good enough for administration.  The low figure in the State is             
$695 in Ketchikan for both district and school administration; the             
highest is $6501 in the Aleutians.  SB 193 caps the $6501 at about             
$1794.  We have 130,000 kids in school and spend $125 million just             
in administrative costs.  This bill would shift about $21 million              
back into the classroom.                                                       
                                                                               
CHAIRMAN WILKEN said one of the main reasons he is working on                  
education is because of the three recent bond issues in Fairbanks.             
He heard from people who said there are school districts they could            
drive to that don't pay a dime for their education and that there              
are places in the State that are far richer that pay a fraction of             
what they pay for education.  After he looked at the foundation                
formula for a while he came to believe it needed to be thrown out              
because it is generally confusing, overly complicated, and                     
generally unfair to a majority of the people in the State.                     
                                                                               
He asked them to agree on three things: that the things you                    
understand you have a tendency to trust, that we should all be                 
carrying our fair share in regards to State expenses and education,            
and that it's the duty of any government to first take care of the             
health and safety of its citizens and secondly to take care of the             
education of its citizens.                                                     
                                                                               
SB 146 breaks education funding into four components and with the              
aid of slides he proceeded to explain this concept.  There's a pie;            
at twelve o'clock is the foundation ($628 million in 1997), three              
o'clock is required local contribution, the next part is optional              
local contribution, and the realization that some places will never            
have the asset base to fund their education and the richer parts of            
the State have to help the poorer.  Tonight he wanted to                       
concentrate on the foundation and required local contribution.  He             
wanted the foundation formula to be simple and fair.                           
                                                                               
CHAIRMAN WILKEN said this bill has been viewed as taking from rural            
areas and giving to urban areas.  He explained using his chart why             
this wasn't true.  He also said that it's not true that the State              
education dollar had shrunk 30%.  Since 1988 State funding has                 
increased 51% and the number of students has increased 26%.  So the            
rate of funding has doubled that of increasing students, although              
he understands that inflation is part of that.  Assuming the cost              
of living in Alaska has averaged an 2.8% increase over the last ten            
years, the power of the education dollar today is the same as it               
was in 1988.  There is no 30% shrinkage.                                       
                                                                               
He thought people were upset with funding because of the formula               
which continues to get money but does not benefit a majority of the            
State.  The thing that is important to understand about                        
instructional units is that first you build the unit out of                    
variable and then you fund it.  This is the problem.                           
                                                                               
SB 146 talks about the per student dollar, he explained.  Forty-               
three states have student dollar public school funding; seven,                 
including us, have instructional units.  He explained his formula              
with the aid of his slides.  He thought this was a voter issue                 
because people who vote value education. They'll understand                    
candidates who have supported more for public education and more               
who have supported less; and he thought they would vote for people             
who supported public education.                                                
                                                                               
In order to get State funding, organized parts of our state must               
get 4 mills or the formula equivalent of property evaluation or get            
35% of prior year's need.  That's not fair.  In SB 146 set the mill            
rate at three, which doesn't decrease the amount of money, or 100%             
of education requirement, whichever is less.  So those who can                 
afford to pay for all their education are asked to do so. The North            
Slope, Valdez, and Unalaska take advantage of the 35% option which             
requires about a half a mill.  He didn't think that was fair.                  
                                                                               
He explained that the disparity cap is a limit on local                        
participation imposed on us because we accept PL874 money (about               
$80 million this year from the federal government).  PL874 money               
comes to us in the first place because some locals have property               
that can't be taxed by law, like Fort Wainright and Eilson.  The               
State accepts that money and spreads it around.  There can't be a              
disparity of more than 25% between your lowest funded and your                 
highest funded school districts, throwing out the top and bottom               
five.  SB 146 just ignores federal money.  He did not think the                
North Slope was paying their fair share which he thought should be             
based on assessed value which is an arms-length relative evaluation            
of the wealth or lack of wealth of the community.  It has nothing              
to do with the State and is done locally.  It's validated by an                
objective and judicial process because it can be challenged and                
taken to court where an agreed figure can be found.  It's also a               
figure that is readily available that can increase or decrease                 
annually.                                                                      
                                                                               
TAPE 97-59, SIDE B                                                             
                                                                               
[WAS NOT RECORDED]                                                             
                                                                               
TAPE 97-60, SIDE A                                                             
                                                                               
CHAIRMAN WILKEN said the North Slope Borough has 37 times the                  
capacity to fund education and they're funding it at one sixteenth             
of what his district is.  He thought there was something wrong with            
that.  He did not think Valdez, Unalaska, or Skagway were carrying             
their fair share.  They need to turn their wealth into education               
assets.  He said it's correct that SB 146 makes them pay for all               
their education.  If the North Slope Borough picked up 100% of                 
their education it would be about 1.8 mills.  His district is still            
at 3 mills.  So that is still less than his district.  Therefore               
the definition of fair share is based on assessed value per                    
student.                                                                       
                                                                               
CHAIRMAN WILKEN said there is also concern with the large number of            
school districts and the duplication in effort to provide services             
like payroll, purchasing, food service, etc.  Fourteen percent of              
our students are in 70% of our school districts.  He thought                   
consolidation needed to be addressed, although not in SB 146.                  
                                                                               
In unorganized areas like Tok there is no way to get any                       
contribution.  Referring to a slide of an Alaska Department of                 
Labor ESD reported earned income, he said that 18,341 people make              
$460 million.  That group contributes little or nothing to our                 
education costs and received 21% of the foundation dollar in 1996.             
This is not fair.  They need to contribute to the education of                 
their children.  SB 146 asks them to do a simple 3% payroll tax                
with a fiscal note of $200,000.  But taxes aren't very popular with            
some folks, so there's a bill talking about a menu.  It imposes on             
the REAAs the responsibility to come up with x amount of dollars.              
There are currently two REAAs, one of which could have a 1% sales              
tax and fund their entire education requirement.  The other could              
fund it with a 2% sales tax.  So he didn't think they were asking              
for that much.                                                                 
                                                                               
He said that some places are somewhat impaired because of the cap              
at the local control level.  Some parts of the State will never be             
able to fund their education.  So there's $11 million is SB 146 to             
spread around to the poor areas which comes out of the rich areas.             
You contribute money to the equalization fund based on relative                
wealth and withdraw it based on the relative number of students to             
be educated, he explained.                                                     
                                                                               
CHAIRMAN WILKEN said at the end of this process he wanted two                  
things: a formula that wouldn't need fixing 10 years from now, and             
one that is simple and fair.  The formula that has been in place               
for 10 years hasn't done that.                                                 
                                                                               
SENATOR ADAMS said he "got his street smarts from Fairbanks"                   
because he arrived in 1949.  He sold newspapers, briefly attended              
the University, and tracked satellites at Gillmore Creek.  He said             
one of the things that the Constitution states that the legislature            
should provide free public education.  He said the bill that                   
Senator Wilken puts on the Governor's desk needs to have equity and            
fairness and not a formula that will provide thievery.  The piece              
of legislation they have provided today robs the North Slope                   
Borough of 1 1/2% of their foundation formula money.  Looking at               
the whole formula, the North Slope Borough is not the problem and              
is not the solution.                                                           
                                                                               
The North Slope Borough pays the second highest tax rate in this               
State of 18.52%.  Anchorage pays the first highest; Fairbanks is               
third.  He thought they needed to relook at some of the slides                 
presented with that in mind.                                                   
                                                                               
The local support of schools in his district amount to almost half             
of the real and property tax that is collected.  State law limits              
the amount of property tax that the North Slope Borough may collect            
for its operations, approximately 5.2 mills or $64 million.  The               
Borough dedicates 44% of this amount to primary education.  If they            
pay 44%, he asked, do they pay their fair share?  And if they pay              
44%, why shouldn't every borough pay that amount.                              
                                                                               
Another point he mentioned is that the North Slope Borough at 63%              
is the second to the last in State funding received as a percentage            
of local basic education needs.  The only one that beats them is               
Metlakatla with 61%.  Fairbanks is at 79%.                                     
                                                                               
School construction for the urban areas in the last five years has             
totaled $203 million.  $7.3 million has been spent in the rural                
areas.  He asked if that was equity.  Pupil transportation is not              
used in the formula and they spend $35 million on a yearly basis.              
                                                                               
In Bethel $76 is spent per student, in Anchorage $216, and in                  
Fairbanks $322.  He said they have no problem with a formula based             
on need, but only if the rest of the formula is based on need and              
not a student head count.                                                      
                                                                               
SENATOR ADAMS said he thought the payroll tax was a very regressive            
measure.  The 1997 federal profit and guidelines for an Alaskan                
family of four is just above $20,000.  He asked if you take the                
formula designed by the chairman, the taxed owed on that would be              
$600 and would it be right to tax a poor family.                               
                                                                               
One of the biggest REAAs in his district shows that a private                  
employee earns less than $11,000.  He asked if that person should              
have to pay $330 to the State while we are not subject to the                  
employment tax.  He thought research needed to be done on this                 
issue.  This tax would unnecessarily hit the poorest workers who               
live in the most expensive part of our State.                                  
                                                                               
He thought they needed to look at long-term ideas and solutions.               
He agreed that there didn't need to be administration for 53 school            
districts.  There is nothing wrong with using the Constitutional               
Budget Reserves Fund which has approximately $3.3 billion and                  
nothing wrong with putting a cap to the Permanent Fund Dividend to             
a vote of the people - with the balance going into an education                
endowment fund.                                                                
                                                                               
He said there is nothing wrong with a school tax concept (of maybe             
$25) like we used to have for $10 per year.  Almost $1 billion in              
wages leaves the State of Alaska with people who utilize the public            
facilities and pay nothing.                                                    
                                                                               
North Slope Borough services are based on property tax, not an oil             
tax, the Mayor said.  They have a right to use the revenues from               
the property tax to meet their crucial human needs.  The people of             
Fairbanks also have a right to use the property tax as they see                
fit.  The members of the State legislature should not dictate how              
local tax based revenues are used.                                             
                                                                               
SENATOR ADAMS said that taking one school district's education                 
funding is not right and that's what these proposals do.  They                 
reallocate and redistribute tax revenues from one community to                 
another community.  He does not have a problem putting money into              
a good solution.  We need to recognize and respect the difference              
between school districts.  When legislators took the oath of office            
they stated that everyone should have equal opportunity in                     
education.                                                                     
                                                                               
He concluded saying that we need to work together on other Alaskan             
issues as well as education and the proposed formula pits them                 
against each other.  Ninety percent to 95% of Alaska's funding                 
comes from rural Alaska.  If some Anchorage legislators want to                
have 40% of the education funding because they have 40% of the                 
population, maybe rural Alaska should have 90% - 95% of the budget             
for their particular problems like education and water/sewer, he               
remarked.                                                                      
                                                                               
SENATOR TORGERSON reminded them that in the unorganized areas of               
the State there's $3.2 billion that's currently not being taxed.               
He has poor people living in his district also and the tax is not              
directed at poor people.  It's directed toward people who can and              
should pay.  He agreed with Senator Adams on the taxation of                   
nonresidents if they could find a constitutional way to do that.               
He was also concerned that something might happen to the ANWR tax              
base in the future.                                                            
SENATOR TORGERSON said he thought in 1963 they should have                     
organized the whole State into boroughs operating under 4 mills.               
                                                                               
SENATOR LEMAN said he wasn't one of the Anchorage legislators who              
was trying to get 40% funding.  He had merely pointed out that they            
have 40% of the students and get 30% of the funding.  He recognizes            
the requirement for the area cost differential.                                
                                                                               
SENATOR ADAMS responded that Senator Randy Phillips has stated on              
the Senate floor and in committee that 40% should go to Anchorage              
because they have 40% of the people.  He asked how they could                  
assess boat in the harbor in Whitier versus snow machines in Minto.            
Did they want to hire an army of assessors because rural Alaska has            
never been assessed, he asked.                                                 
                                                                               
MR. BOB SHEFCHIK, Assistant Superintendent for Business and Finance            
in Fairbanks and President of the Alaska Association of School                 
Business Officials, said they did get seven board members to agree             
on four or five things, but they haven't endorsed any legislation,             
yet.  They feel that there should be an equitable tax burden                   
between organized municipalities and unorganized REAAs, although               
there aren't any easy answers to that.  Categorical funding should             
be considered as a percentage of enrollment. Funding intensive                 
needs students separately is good because students with multiple               
handicaps are not hard to identify and are very expensive to serve.            
In small districts, particularly, the burden would be large.                   
                                                                               
Current accounting of students to generate money causes problems in            
program delivery because the formula penalizes districts for                   
actually delivering services in a better way outside of the                    
categories.  The current formula requires designing a program to               
maximize dollars.                                                              
                                                                               
They all agree the formula should be simple.  He said there is no              
mechanism in the current formula to account for increased costs                
over time and Senator Wilken's bill requires that it be reviewed               
annually.                                                                      
                                                                               
Finally the cost differential should reflect the cost of running               
schools in a community, not just the cost of goods and services                
necessarily.                                                                   
                                                                               
SENATOR ADAMS explained that one of the things that's happened in              
the last 10 years is that our impact aid is down $10 million.  He              
asked if the State should pick up that decease as it continues.                
                                                                               
MR. SHEFCHIK replied that the Board hadn't taken a position on                 
that, although it has caused problems for them.                                
                                                                               
SENATOR ADAMS asked how his school district prioritized special                
education, bilingual or vocational education.                                  
                                                                               
MR. SHEFCHIK replied that right now the categorical funding                    
provided by the State is insufficient to meet the needs of any of              
those programs.  So they develop the program and allocate the money            
whether it be from categorical funding, local sources, or general              
State aid.                                                                     
                                                                               
SENATOR ADAMS asked if the legislature cut those three categories,             
would his school district make a public statement supporting those             
particular programs.                                                           
                                                                               
MR. SHEFCHIK said he couldn't speak for the Board, but their                   
actions support them now.                                                      
                                                                               
SENATOR TORGERSON commented that Senate Finance Committee has spun             
off all the job training and vocational programs of all budgets and            
is taking a separate look to see where they need shoring up.  There            
is about $65 million that goes to the Department of Education                  
that's outside of the funding formula that comes back to the                   
districts.  There's a lot of belief that that needs some massaging             
along with the foundation formula.  About $100 million goes to                 
those programs now and they don't seem to be receiving $100 million            
at the end.                                                                    
                                                                               
CHAIRMAN WILKEN responded that they had looked at impact aid in the            
last three years and it has increased 19% to $80 million in 1998.              
There hasn't been an erosion of impact aid although it could                   
happen.                                                                        
                                                                               
MR. SHEFCHIK said that the ones impacted in Fairbanks, Anchorage,              
and Kodiak are primarily military bases.                                       
                                                                               
SENATOR ADAMS noted that the money for the foundation formula has              
increased by 51%, but ADMs have only increased by 24%.  He asked if            
that was caused by the economic crash in the mid 80s.                          
                                                                               
MR. SHEFCHIK replied that it was caused by the change in assessed              
values in organized areas and the fact that categorical (special               
needs students) areas of funding have risen faster than the general            
population.                                                                    
                                                                               
SENATOR ADAMS asked since the State of Alaska doesn't calculate                
inflation, what would be the amount the State would have to pay to             
each school district today starting from 1991.                                 
                                                                               
MR. SHEFCHIK replied that he didn't know.                                      
                                                                               
SENATOR ADAMS asked if it would be about $74,000.                              
                                                                               
MR. SHEFCHIK said it would be in the amount of $70,000 - $80,000.              
                                                                               
SENATOR ADAMS then asked if they were short funding education.                 
                                                                               
MR. SHEFCHIK answered it felt that way to him in March of every                
year when he was trying to balance the budget.                                 
                                                                               
SENATOR TORGERSON responded that it wasn't right to look at it like            
that.  Every year they increased the amount to education, although             
not necessarily the funding formula, to about 15% above ADM.                   
                                                                               
He asked if his district has had to reduce because of the federal              
disparity.                                                                     
                                                                               
MR. SHEFCHIK replied that they are a long ways away from the cap.              
                                                                               
MR. DON STEIN said that in-home schooling is left out of the                   
formula and there is good teaching done in the home schools,                   
especially in North Pole.  He wanted them to get their share of                
school funding.                                                                
                                                                               
TAPE 97-60, SIDE B                                                             
                                                                               
MR. SHEFCHIK explained that it costs about $300 per month to send              
a child to a private school.                                                   
                                                                               
SENATOR LEMAN commented that he is very supportive of home                     
schooling in Alaska.  He thought there were things they could do to            
encourage people to be able to participate a in full menu of                   
educational choices.                                                           
                                                                               
MS. BONNIE WILLIAMS said she served on the Borough Assembly from               
1988-91 and experienced one aspect of the school formula which was             
approaching the cap.  At the same time the legislature was looking             
for places to reduce the budget and were considering reducing the              
formula or not increasing it.  She figured out a way to get around             
the State law, but she thought it was wrong to have a State law                
that causes local government officials acting in good faith to                 
figure out some way to get around the laws so they can do what they            
are supposed to do.  She supported that particular aspect of SB
146.  She likes the fact that the REAAs would now be contributing.             
She thought it wasn't exactly fair, but it was more fair.  They                
would never get any kind of tax system that was absolutely fair to             
everyone.  She also like the simplicity.  She commented that she               
thought school officials may have misused accounts in order to                 
acquire enough money to operate.  She suggested having a means to              
alter the amount without having to change the statute for special              
developmental students.                                                        
                                                                               
MS. WILLIAMS said that the legislature hadn't kept pace with                   
inflation for education, and it's not the school districts that                
have suffered, but the University of Alaska.  FY 85 had $169.8                 
million in general funds, FY 98 had $166.9 in general funds and at             
the same time inflation went over 37%.                                         
                                                                               
SENATOR ADAMS asked if she wanted to just eliminate the section on             
the cap limitation, AS 29.45.                                                  
                                                                               
MS. WILLIAMS replied yes.  SB 146 does that so if local districts              
want to tax themselves more, they could.                                       
                                                                               
MR. ADAMS responded that the problem with eliminating it is if                 
Anchorage and Fairbanks rob the North Slope Borough of its 1 1/2%,             
the North Slope Borough would tax the oil industry to recover that             
money with a hidden tax and he didn't think the majority would want            
to do that.                                                                    
                                                                               
SENATOR TORGERSON said there was a survey in the school districts              
and 100% of the boroughs said to remove the cap and 72% of the                 
school boards said to leave some sort of cap in place.  He said we             
do want to do away with the federal cap that's placed on them                  
because of the way we use and accept PL874 funds.  This decline                
(27%) has affected all of their budgets.                                       
                                                                               
MR. RICH SEIFERT said he thought everyone in the room would agree              
that the distribution of the Permanent Fund dividend is fair and               
for all intents and purposes that is a negative tax.                           
                                                                               
He noted that according to census figures 31.4% of the population              
is under 18 years of age or 191,098 people.  They each pay an                  
income tax on their Permanent Fund dividend of $71, a total of                 
$13,567,000, to the federal government.  None of the taxed portion             
would go to the IRS if we capped the dividend below the federal                
unearned income ceiling which was $600 last year.  If they capped              
it at $599 to escape the taxable limit, minors who don't have other            
income wouldn't have to pay taxes any more or even file.                       
                                                                               
He suggested we should do this because 31% of our population                   
requires compulsory education, needlessly pays taxes, and                      
contributes no revenue to their required education.  Why not use               
the taxed portion of their dividends to establish and endow and                
education a trust rather than giving it to the feds.  At least                 
another $98.5 million would come from the adults.                              
                                                                               
MS. MEG NORDALE, President, Fairbanks Council of PTAs, said she                
also sits on the State Board of Managers for the Alaska PTA.  One              
of their priorities was equitable funding across the State along               
with additional funding for education.  They want the best use of              
the resources available for all of the children in the State.  She             
said there needed to be public trust for quality schools.  She                 
asked where inflation fell in with their numbers.  She would also              
be concerned about asking one particular area of the State to fund             
100% of their education costs and wondered if they would follow                
programs like the Governor's quality initiative if the State is not            
contributing any dollars to their school district.                             
                                                                               
She supported combining administrative costs in smaller school                 
districts.                                                                     
                                                                               
SENATOR ADAMS asked her where additional funding could come from.              
                                                                               
MS. NORDALE replied that there was some discussion of the                      
endowment.                                                                     
                                                                               
SENATOR ADAMS said calculating inflation in since 1991 would bring             
the unit up to $74,000 and asked if she thought the legislature                
should look at that and if the school districts were happy with                
their funding today.                                                           
                                                                               
MS. NORDALE responded that every year in Fairbanks they get the                
$61,000, but every year they have to cut.  Their district has done             
a good job of preserving low class size and programs.  She is                  
concerned that at this point have they cut all the administrative              
support necessary for teachers to do their jobs the most effective             
way.                                                                           
                                                                               
MS. FREDI BUFFMEIR, Alaska Association of Elementary School                    
Principals, said looking at the foundation formula has stimulated              
healthy discussions.  The public and legislature have a strong                 
desire for increased accountability by its schools.  The changes               
including evaluation, content standards, teacher performance                   
standards, and testing represent a huge challenge for our schools,             
but done well, they will be positive for kids.  However,                       
implementation of these things will cost and she urged the                     
legislature to look at ways of funding the staff development that's            
going to be needed to implement the standards.                                 
                                                                               
MR. ANDRE LORELL, President, Alaska Association of Secondary School            
Principals, congratulated Senator Wilken on his understanding of               
this issue and his new approach.  He thought Senator Adams approach            
represented the status quo.  They need to communicate about how                
equity is going to be played out in various different school                   
settings.  The cost of implementing changes needs to be factored               
in.  Being asked to do more with less is beginning to impact what              
is going on in the classroom.  He wanted the legislature to focus              
on recognizing high performance schools and not just the problems.             
He felt that the committee needed to look at the numbers being                 
presented by different people and find out why they differ for                 
clarification.  He testified that school enrollment and funding had            
gone up, but it hadn't kept pace with inflation.  He is concerned              
how implementation of a new foundation formula would come into play            
with phase three of the five-year plan of the legislature.                     
                                                                               
SENATOR TORGERSON asked how the Secondary School Principals would              
fix correspondence study.                                                      
                                                                               
MR. LORELL said he felt some districts are operating a viable                  
correspondence school where there is staff benefiting students who             
live locally.  Other districts are running programs in which the               
students do not live in the geographic area.  If there's going to              
be correspondence, it shouldn't hurt the districts that have                   
legitimate and viable correspondence programs, but it shouldn't                
benefit districts that are looking for another way to generate                 
funds for their district.                                                      
                                                                               
CHAIRMAN WILKEN said he didn't think the majority would take money             
away from K-12 education in order to balance the budget.  He shares            
his concern about assessment normalization which needs to be a                 
little less political.  There needs to be a disparity plan that                
will survive a court challenge.                                                
                                                                               
SENATOR TORGERSON said he thought there would always be court                  
challenges.  One legislature cannot bind another.                              
                                                                               
MR. SCOTT CALDER said he is concerned with funding for special                 
circumstances where it was not applicable to the general                       
population.                                                                    
                                                                               
TAPE 97-61, SIDE A                                                             
                                                                               
MR. CALDER concluded by saying that there is great support for                 
providing the best we can for kids by figuring out what we need and            
then figuring out how to best provide it.                                      
                                                                               
MR. COLE SONEFRANK thanked Senator Wilken for bring these issues               
forward and thought their approach was good.  He thought that                  
clearly something needed to be done with the cap for some parts of             
the State.  He didn't think doing away with it entirely was a good             
idea, however.  He is concerned that they are attacking the North              
Slope Borough in the name of fairness.  He doesn't have a problem              
with having the rich folks pay when they can.  He's concerned that             
it pits rural against urban.                                                   
                                                                               
CHAIRMAN WILKEN said that they had wrestled with what is a fair                
share and have come up with a flat mill rate and assessed value.               
They have challenged people around the State to define what a fair             
share is if they don't like what they see.                                     
                                                                               
MR. SONEFRANK responded he wasn't sure they could make it quite as             
simple as just assessed value.  He thought they might have to put              
another factor in there and deciding what that factor is their                 
problem - whatever it takes so the North Slope Borough isn't pitted            
against the Fairbanks North Star Borough.                                      
                                                                               
SENATOR TORGERSON asked on the equity issue if Big Delta should                
have to pay anything.  He shared a lot of Senator Adams concerns,              
but the longer they wait to do anything, the more the disparity                
gets wider and wider and wider.                                                
                                                                               
MS. JODI OLMSTEAD said she didn't really trust things that went on             
with our bureaucrats because they have their ideas and decisions               
made before they come to town and they leave when the agenda has               
been spoken.  She thought they didn't care and that nothing was                
done to meet the needs of her comments.                                        
                                                                               
Her concern is using numbers that don't exist.  There are a lot of             
drop-outs and kids who fall through the cracks or special needs                
children who are at home because their needs can't be met at                   
school.  Academics is failing us she said.  She provided the                   
committee with some books and pamphlets on endowments and ideas for            
money from Governor Knowles which confused her because he suggested            
getting the money from the budget reserve and the Permanent Fund.              
Her biggest fear is his five-year welfare plan.  Right now she said            
all of them can't educate her son, who is currently in the                     
hospital, because he is a special needs child.  He doesn't learn               
the way society chooses to teach.                                              
                                                                               
She was concerned that children were taken out of schools for drug             
use, perhaps, and put into nonacademic-learning situations and that            
is not going to help them.  She has heard at a lot of PTA and other            
meetings that there aren't the people on buses and in schools to               
control children.  In conclusion she said that her concern was that            
even with all the money the needed they wouldn't educate her son               
and other like him.                                                            
                                                                               
MS. NANCY WEBB said she had concerns with the 20% for special                  
education and asked how they thought that would work when there may            
be ups and downs every years with special education children who               
are not always easy to identify.                                               
                                                                               
CHAIRMAN WILKEN explained that the formula was set because                     
approximately 19% is the current percentage.  It sets a standard               
foundation upon which local governments can build.  If they have               
lingual, special education, gifted and talented, etc. and want to              
do more with that 20% per student, it's a local decision.  As an               
example, in Bethel they are teaching Yupik as a second language,               
but he wasn't sure the State should be asked to fund that entirely             
at the expense of categorical funding somewhere else which is what             
is happening today.                                                            
                                                                               
MS. WEBB asked why the developmental disabilities be treated                   
separately.                                                                    
                                                                               
CHAIRMAN WILKEN said the developmentally disabled is fixed at                  
$22,500 per student and wouldn't be dealt with in the foundation               
formula.                                                                       
                                                                               
MRS. CAM CARLSON supported getting rid of the law requiring every              
school district to have a superintendent because you didn't need a             
superintendent for just one building or even three buildings.  She             
supported reimposing a cap on administrative costs for each school             
district, consolidating the smaller school districts, and repealing            
the hold harmless provision.                                                   
                                                                               
She agreed with Senator Leman's comments on the radio this morning             
and particularly that there should be a local contribution to                  
education.  She thought local involvement was necessary so their               
was community concern with the facts, figures, and how the money is            
spent. She said we need to make sure that educational funds are                
delivering what they are supposed to be.  She was concerned that               
school construction would cost more just because more money was                
available.  She particularly disagreed with an endowment.                      
Education should have to go up against every other program in the              
State for evaluation when monies are being handed out.  No program             
should have a free ride.                                                       
                                                                               
She was concerned with extended day kindergartens with 29 students             
per class.  She thought that the teachers could teach half days;               
they could be spending less money and the student teacher ratio                
would be smaller.  She wanted the legislature to look into this                
because now people who want half day kindergarten can't get it.                
                                                                               
SENATOR ADAMS said they all need to respect each others opinions.              
He hoped after six hearings around the State they would do                     
something about this issue.  They need to address over-crowding and            
new enrollment and this takes money.  It doesn't stop at just                  
charts and saying there is no money to give.  There is money to                
take care of this.  There needs to be money for new schools.                   
Portables like the ones in Mat-Su are unsafe and there is                      
sufficient money to take care of that as well as deferred                      
maintenance which is a problem all around the State.  One of things            
we don't even measure is quality of education which should also be             
put forth, he said.                                                            
SENATOR TORGERSON urged people to continue to contact their                    
legislators regarding their thoughts on this issue as it works its             
way through the legislative process.  He advised that witnesses                
begin to comment on the actual bills.                                          
CHAIRMAN WILKEN thanked everyone for their input on this issue and             
adjourned the meeting.                                                         

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