HB 425-BOARDING SCHOOL FUNDING Number 1295  CHAIR GATTO announced that the next order of business would be HOUSE BILL NO. 425, "An Act relating to funding for school districts operating secondary school boarding programs, to funding for school districts from which boarding students come, and to inoperative school districts; and providing for an effective date." Number 1314 REPRESENTATIVE JOHN COGHILL, Alaska State Legislature, testified as sponsor of HB 425. He told the members that several issues have come to his attention which he will address. He said Section 1 does not need to be in this bill, so he will be requesting that it be amended out either in this committee or the next committee of referral. Representative Coghill explained that Eddie Jeans [Finance Manager, School Finance and Facilities Section, Department of Education and Early Development] confirmed that Section 1 refers to the ten-student count provision which is not addressed in this legislation. Number 1414 REPRESENTATIVE COGHILL clarified that HB 425 does not apply to the Nome-Beltz High School where students are brought in from villages for two-week classes. He commented that it was not his intention to provide airfare for students to fly in and out of Nome for these classes. Representative Coghill told the members that he intends to suggest that language be inserted in the bill to limit this pilot program to 170-day schools. REPRESENTATIVE COGHILL commented that another problem has come to his attention that some boarding schools are getting federal grant money and it is not his intention for the funding in HB 425 to be added to federal funding. He explained that he only recently discovered this problem when he was reviewing a list of federal grants to Alaska and noticed that Galena received some funds for its boarding school. He noted that Nenana did not. Representative Coghill told the members that he is hopeful that Mr. Jeans will help him address this issue. REPRESENTATIVE COGHILL referred to a list of the schools that show savings to the state of Alaska. Nenana saves close to $319,000, he said. If this bill passes that savings would be used for the stipends for students. He told the members he believes the cost to the state would be an even draw for a very worthwhile educational opportunity. He added that he believes the Galena, Nenana, and Bethel schools are doing an excellent job and are so different in their operations that he is looking for the broadest language possible to ensure inclusion in the pilot program. Number 1610 REPRESENTATIVE COGHILL emphasized that these boarding schools are open to any student who cannot obtain an education in his/her home community; however, this bill would also provide the opportunity for students who wish to apply for other reasons. He reminded the member that each of these boarding schools has a waiting list for entry. He asked the committee to move the bill to the next committee of referral. Number 1637 CHAIR GATTO commented that Representative Coghill wants to delete Section 1 and do a rewrite of some of the language in the bill. REPRESENTATIVE COGHILL replied that he has a question that just came to him that he is exploring. He told the members that he would commit to correcting these points in the next committee of referral which is the House Health, Education and Social Services Standing Committee. Number 1666 REPRESENTATIVE WILSON commented that she does not understand how money is saved. She said that as chair of the House Health, Education and Social Services Standing Committee she would be willing to work with the sponsor of the bill to develop a committee substitute. REPRESENTATIVE COGHILL replied that he would prefer to have someone in the Department of Education and Early Development explain the savings component that was mentioned. Number 1723 EDDIE JEANS, Finance Manager, School Finance and Facilities Section, Department of Education and Early Development, testified on HB 425 and answered questions from the members. He pointed to a handout in the members' packet from the Nenana City School [District] which provides an analysis of the per student dollar amount generated through the foundation program for the students based upon the community that each student lives in. That figure is then compared with the dollars generated by attending public school in Nenana. Mr. Jeans said in looking down the list it shows that many of these schools have very small student populations and therefore the dollar amount on a per student basis is high. When students come to Nenana the per student amount decreases because of economies of scale. He summarized that is the process used in determining the savings. Mr. Jeans told the members that the state has been realizing this savings for a number years due to these students attending school in Nenana. Number 1795 REPRESENTATIVE WOLF asked Mr. Jeans how much the Galena home school program supports the boarding school program. MR. JEANS responded that based upon the audited financial statements the department got for the Galena City School District last year, the amount of money recorded as its expense for the correspondence program was close to $2 million less than what was actually generated from the foundation program. He clarified that there are caveats to this statement. The correspondence expenditure recorded is for the instructional program for correspondence only. The program also provides services for special education which would be allocated to a different part of the audit. There are also administrative expenses that are associated with the correspondence program that would be the school administration component of the budget. He summarized that he could not say that Galena correspondence program made $2 million. It is not that simple. Based on that difference, he said, it is safe to say Galena made some money on the program and it is being used to subsidize other programs, but to what degree he could not say. Number 1928 REPRESENTATIVE GARA asked if the bill provides that each of the students who attends these schools would get $6,000 outside of the foundation formula. MR. JEANS replied no. Number 1967 REPRESENTATIVE GARA asked if he understands correctly that if it is found that adequate educational opportunities are not available in a student's home district, then the student could attend one of these boarding schools. MR. JEANS explained that the current program which is outlined in regulation says if a student does not have daily access to a secondary program, then the student would qualify for a boarding home stipend. It is not necessary to attend a boarding home school; the student could opt to go to a community where the student would be housed with a family and a stipend would be paid to that family through the school district, he said. Regulations also provide for one round trip airfare to and from the student's residence. In response to Representative Gara's question, he clarified that all this bill does is remove the criteria that there has to be a lack of daily access to a secondary program in order for a student to qualify for this program [stipend]. This pilot program would be offered until 2009, Mr. Jeans added. REPRESENTATIVE GARA commented that the compensation mechanism would be exactly the same. This pilot program just provides the opportunities for children who have the adequate opportunity locally, but who chooses to attend a boarding school. MR. JEANS replied that is correct. REPRESENTATIVE GARA asked how the funding works. MR. JEANS responded that the stipend is paid to the school district to cover the residential cost. REPRESENTATIVE GARA asked how the base student allocation is paid for. MR. JEANS replied that the students are counted in the school they attended for which there is foundation funding. For example, in the case of the Galena school where there are 83 students being served, the state pays foundation aid for those students. He commented that only school age students [grades 9 through 12] qualify for the base student allocation, so if there are 13-year or 14-year students there would not be any funds provided for them. Number 2125 REPRESENTATIVE GARA concluded that the only fiscal impact is that students leave an area where there is a higher base student allocation and go to an area of a lower base student allocation. MR. JEANS replied that is correct. REPRESENTATIVE GARA pointed out that one or two students in small school districts may opt for this choice. The cost in that smaller district is still the same; however, the base student allocation for those two students has gone elsewhere. Representative Gara said that while the cost to the state may not have changed, there is a loss in funds to the school district the student has left. MR. JEANS responded that Representative Gara analysis that fewer students equates to fewer dollars is correct. CHAIR GATTO commented that conversely if a couple of additional students enroll the district receives more funds. MR. JEANS pointed out that there is a hold harmless clause for those school that may fall below the threshold of ten students. For example, if a school originally had 12 students, but three elected to go to a boarding school, that school would be held harmless and still be funded for the ten-student minimum, he said. He reminded the members that the way the foundation program provides funding is by group. The first grouping is 10 to 20 students. The funding is the same within those parameters. Mr. Jeans said that for example if a school had 15 student and four left then the school would not loose any funding. The school's funding is still the same, he emphasized. MR. JEANS said in response to Chair Gatto's question about a minimum number of students to consider, he suggested that there probably is a minimum. He commented that the legislature would probably not want to maintain a school in a community if there are only three or five students. Mr. Jeans told the members that the current foundation program says that there has to be at least ten students to maintain a school for funding purposes. The hold harmless provision in this bill says that if a school falls below ten students, the school will not be closed and would still be funded for ten students. He reiterated that in a school of 10 to 20 students, there could be students that come or go and the school still gets the same funding. Number 2297 REPRESENTATIVE GARA said he understands that in the school districts where there are ten or less students, it is held harmless. However, in a small school district where there are 60 students in grades Kindergarten through 12th (K-12), that is five students per grade, if one or two students leave, the same number of teachers are still required. So those school districts are left with the same costs, but with $12,000 to $20,000 less compensation from the state. That is where his concern lies, he said. Representative Gara commented that is a significant loss that cannot be absorbed. MR. JEANS responded that schools that have 60 students do not generate $10,000 to [$20,000] per student. The cost per child goes down substantially. He explained that the size of school Representative Gara discussed will normally have a student enrollment variation of two to three kids each year. CHAIR GATTO commented that just because there are 60 students and 12 grades, that does not mean the school has 12 teachers. Perhaps there would be three or four teachers, he offered. Number 2374 REPRESENTATIVE COGHILL said that for those presently enrolled in these schools there would probably not be more than 220 students out of 133,000 students in Alaska. The impact would be small, he commented. CHAIR GATTO asked if Representative Coghill believes this may become a trend where there would be regional boarding schools. REPRESENTATIVE COGHILL replied that the bill is a pilot program with a set time period and limited only to those schools that are currently operating. He commented that the program needs to demonstrate that it works before there should be any proliferation of boarding schools. Number 2462 REPRESENTATIVE WILSON explained that in the community of Pelican there are five high school students. The community is considering not retaining the one high school teacher next year. She explained that three of the students graduate this year, which leaves only two students next year. She asked Mr. Jeans if a school could send students to another school. Number 2517 MR. JEANS replied that according to current regulations neither a school district or the Department of Education and Early Development can send a child outside of their community of residence. The school district will still have the responsibility of providing educational services although it may not be the method preferred. It may be through a correspondence program and the district may contract with another district to provide that correspondence program. Number 2540 REPRESENTATIVE SEATON asked Mr. Jeans what number of students [are required in] secondary schools where teachers are provided. MR. JEANS replied that he is not sure that he understands his question. The state funds K-12 schools as small as ten students. If a school has a secondary school student attending, the school must provide secondary services. REPRESENTATIVE SEATON asked if he understands that if there are two to five students in the secondary level the school must provide services. He asked if the important point is that there be at least ten students in the entire school. MR. JEANS agreed that the school must have ten students. He reminded the members of the case of St. George that runs a Kindergarten through 8th grade school. St. George is still required to provide educational services to the kids in the 9th through 12th grades if the students elect to remain in the community, he said. He added that it is his understanding that the students from St. George are electing to go to Galena. Number 2620 REPRESENTATIVE KAPSNER asked for further clarification on the deletion of Section 1. MR. JEANS explained that Section 1 relates to inoperative school districts. It has no bearing on this piece of legislation whatsoever, he said. He told the members that initially Representative Coghill believed that Section 1 was tied into the minimum of ten students for funding purposes. It is not, so it is unnecessary. Number 2654 REPRESENTATIVE WILSON asked if Nenana offers education beyond K- 12. MR. JEANS responded that Galena offers education beyond grade 12. REPRESENTATIVE WILSON asked who pays for a student who has completed 12th grade and wishes to continue through the 13th or 14th year for vocational training such as beauty school. MR. JEANS replied that it would not be paid by K-12 education. REPRESENTATIVE SEATON asked if the full school year is 170 days. MR. JEANS told the members that it is 180 days, ten of which can be in-service days. REPRESENTATIVE GARA posed a hypothetical situation where the Municipality of Anchorage lost one student and the municipality lost one percent of its funding. It gets about $300 million of foundation formula money. If a student leaves [and there was a one percent loss in funding], the municipality would loose $3 million. He commented that is not going to happen in Anchorage, but in a school district that has 100 students, when one student leaves then the district has lost one percent of its funding. He suggested a hold harmless provision for the base student allocation for schools with 100 or less students when there is a loss of students to boarding schools. He asked if Mr. Jeans believes this would have a significant fiscal impact. Number 2777 MR. JEANS replied that he really does not know. He reminded the members that the discussion is really about Galena, Nenana, and Lower Kuskokwim to Bethel boarding home programs. These programs are currently operating at capacity or close to capacity and these kids are already coming from communities around the state. If school districts were really concerned about the loss in enrollment, he said he is sure those districts would be testifying today about the need for a hold harmless provision. He added that he has not heard that this is a problem from school districts. Number 2808 REPRESENTATIVE GARA said that the way he reads Section 1 is if it is deleted a school district with ten students looses a student, then the school district closes down. Why isn't there hold harmless language that says a school district will not be closed if the last marginal student goes to a boarding school. MR. JEANS told the members that the only school district that could fall into that category is the Pelican City School District. He commented that he really cannot see why the legislature would want to keep a school district operating if it had fewer than ten students. CHAIR GATTO commented that there may be a desire to raise the number of students to a level higher than ten students. MR. JEANS said in response to Representative Gara's question that the hold harmless provision for the foundation count would apply in the example he put forth. If the school district's count fell below ten students because a student(s) went to the boarding school then the district would be held harmless. REPRESENTATIVE GARA asked how the hold harmless provision reads. MR. JEANS replied that it is Section 3 of the bill which reads as follows: Sec.3. AS.14.17.905 is amended by adding a new subsection to read: (c) Notwithstanding (a)(1) of this section, a community with an ADM of less than 10 shall be counted as a school if the ADM would be at least 10 if each student from the community who is enrolled in a district secondary school boarding program outside of the student's community and operated under AS 14.16.200 were counted as a student in the community. MR. JEANS told the members that what this section says is if a school district or community falls below ten students and it can be demonstrated to the department that enrollment dropped because students went to a boarding school, then the district would be held harmless for foundation funding purposes at the minimum of ten students. Number 2910 CHAIR GATTO pointed out that this has already been discussed in an earlier meeting. He said for example that a whole family of kids could leave bringing the student count down to five. Even though a school of five is not what is wanted, with this hold harmless provision that is exactly what would happen if the students went to a boarding school, he said. He told the members that it is not a provision that he is entirely comfortable with. Number 2933 REPRESENTATIVE GARA pointed out that there could be two students who decide to spend their last year in a boarding school, then the school would close. The next year two more students enroll and the school district would have open the school again. He commented that this is the kind of instability that could cost a fair amount of money. MR. JEANS responded to Representative Gara request for clarification between the differences in language in Section 1 and Section 3 with respect to the number of students which would trigger the closure of a school district. He told the members that of the districts that serve 10 to 15 students, the majority of those students are elementary school age. There are not a great number of secondary school age students. TAPE 04-14, SIDE B  Number 2966 MR. JEANS said it would be highly unlikely that there would be five secondary students who would leave a district. He explained that the first section of statute is statute that has been on the books a long time and it says that if a district falls below eight students the school board may declare itself inoperative. The foundation formula was rewritten under SB 36 which said to qualify for funding as a separate community, not district, there must be at least ten students. He clarified that one section is dealing with the operation of a school district as a whole and the other is dealing with the number of students for funding purposes within a community. Number 2848 REPRESENTATIVE KAPSNER expressed her concern about removing Section 1. She told the members that she attended boarding school for one year and for extenuating circumstances it did not work out. She said she had two sister who went to Mt. Edgecumbe. It worked out for one sister, but not for the other, so she moved back to the village. REPRESENTATIVE KAPSNER told the members that at the Bethel Alternative Boarding School (BABS) students have to take a sobriety pledge. She said that is wonderful, but because of zero tolerance some of the students are asked to leave if the pledge is broken. She said she believes it would be terrible if a student who went to that school messed up once, was sent home, and then dropped out because there were no options at home. Number 2842 MR. JEANS replied that the example Representative Kapsner posed to the committee is happening at BABS today. He explained that all this bill does is provide some financial assistance with the residential component for a five year period and then it will be decided if it is effective or not. REPRESENTATIVE KAPSNER commented that she was speaking to her concern of the removal of Section 1. MR. JEANS said that Section 1 can stay in the bill. He told the members that Section 1 has no impact one way or the other. The hold harmless provision in Section 3 will cover the provision in Section 1, he reiterated. REPRESENTATIVE GARA asked Mr. Jeans to again explain the fiscal impact in terms of saving general fund money. Number 2800 MR. JEANS told the members that the department had estimated that the fiscal impact would be approximately $1.4 million. He said he believes that fiscal note could be reduced downward by $227,000 now that Representative Coghill clarified that it is not his intention to provide round trip airfare and boarding expenses for the two-week classes such as those in Nome. MR. JEANS commented that the savings that was discussed early was based on the analysis that Nenana provided on students that are currently attending Nenana. He explained that what is being said is that if these students went to school in the student's home communities of residence, the state would be paying an additional $318,000 in state foundation aid to those other school districts. Number 2728 RICH BAUYMFALK testified in support of HB 425. He told the members that the students elect to go to the boarding schools for many reasons including sports and are getting a better education. Mr. Bauymfalk said the students and parents are not looking at the dollar amount, it is the education that is of concern. He urged support of HB 425. Number 2641 JIM SMITH, Superintendent, Galena School District, testified in support of HB 425. He told the members that Galena has 85 students that come from 35 different communities in Alaska. Galena has three different programs including the local school district, the residential school, and the correspondence school. The effect is that it provides a larger population base just as a larger community has that advantage, he said. Mr. Smith said if the amount of money received for average daily membership (ADM) for Galena was divided by the total number of students served in the three programs, the amount received would be about $3,800 per student. By using that model it means that Galena is serving those 85 students attending the boarding school for roughly $300,000, he explained. If these 85 students were sent home to their home districts the cost to the state to educate these student would be $680,000. Mr. Smith pointed out that even with the proposed pilot program which provides funds for residential services, it would still be cheaper to educate the students at Galena than to send them all home. MR. SMITH said that Galena has been aggressive in securing federal grants to operate a resiliency program. These funds are shared by Nenana and Mt. Edgecumbe. There is also the Alaska Natives grant which will come to the school next year. It will support five dorm positions in Galena, three in Mt. Edgecumbe, and one in Nenana. This grant has been shared with the other schools for the last four years, he commented. Number 2436 MR. SMITH told the members that the Alaska congressional delegation supports the process of saving lives and providing education for those students who do not have a secondary program. He said that Galena is trying to improve the lifestyle and the residential life of the students. The school district has the kids six hours per day, five days per week, but the residential halls have the kids the rest of the week, he added. He cautioned that the federal funds are not funds that can be planned on and hopes the state will support the program which will give them additional funds that can be planned for. Mr. Smith explained that he currently issues teachers contracts with some risk because he often has to get the funding for those positions as the year progresses. He told the members that HB 425 would be a godsend to Galena and urged the committee's support. Number 2302 ROBERT RYCHNOVSKI testified in support of HB 425 and answered questions from the members. He urged the support of the Nenana boarding school program. He told the members that the school provides a very good alternative for students who need to attend the boarding school for a variety of reasons. He said he has visited the school several times and was very impressed. Parents worry that their kids are safe when they are away from home, and the school's living center is very well run and it has outstanding employees. It is clear the staff cares about the students. The place is well setup, well maintained and very clean. He said he believes his daughter is getting a good education there. MR. RYCHNOVSKI told the members that he was surprised when he heard of the funding situation and is concerned that this school remain open. Number 2216 CHAIR GATTO asked how many children he has enrolled at Nenana. MR. RYCHNOVSKI replied he has one daughter attending there. CHAIR GATTO asked what kind of an education was available in Iliamna. Specifically, how large was it and how many teachers were there, he asked. MR. RYCHNOVSKI replied that there were about 80 students in Iliamna and it has about seven teachers. He offered that the reason his daughter went to Nenana was due to the limited class offerings in rural districts. Nenana offered classes that he wanted her to have. Number 2171 REPRESENTATIVE SEATON moved Amendment 1 as follows: On Page 1, delete lines 5 through 10 Renumber the sections accordingly Number 2152 REPRESENTATIVE GARA said that he does not have an objection, but wondered if he could ask Mr. Jeans another question. He commented that he know Representative Kapsner has a concern about removing Section 1 from the bill and asked if the committee could wait until her return to committee before proceeding with Amendment 1. RYNNIEVA MOSS, Staff to Representative Coghill, Alaska State Legislature, testified on behalf of Representative Coghill, sponsor of HB 425. Since a lot of the members that sit on this committee also sit on the next committee of referral, she suggested that Representatives Coghill and Kapsner get together to discuss her concerns. If a change is necessary the change could be made in the next committee of referral, she commented. Number 2081 There being no objection, Amendment 1 was adopted by the House Special Committee on Education. Number 2029 REPRESENTATIVE SEATON moved Amendment 2 as follows: On Page 1, Line 14 Between the words "a" and "secondary" Insert "full school year" CHAIR GATTO asked Representative Seaton to read the sentence as it would be with the amendment. REPRESENTATIVE SEATON replied that with this amendment the sentence would read as follows: boarding programs. (a) A district that began operating a full school year secondary boarding ... Number 2014 REPRESENTATIVE GARA objected for purposes of discussion. He asked if the term "full school year" is defined somewhere. REPRESENTATIVE SEATON replied that the Department of Education and Early Development told the committee that a full school year is 180 days of which 10 days could be used for school in-service training. REPRESENTATIVE GARA withdrew his objection. There being no objection, Amendment 2 was adopted by the House Special Committee on Education. REPRESENTATIVE GARA commented that the analysis from Galena and Nenana reflects that HB 425 would save the state money. He asked if the department has a position as to whether this bill would save the state money. MR. JEANS replied that the analysis that was done by Nenana seems reasonable; however, he has not verified the numbers. He pointed out that when Nenana told the members it would be saving the state of Alaska, what is really being said is that this is the money that is currently being saved. He reiterated that this bill will cost the state about $1.2 million each year for the five year pilot program. Mr. Jeans pointed out that the fiscal note needs to be corrected. Number 1901 REPRESENTATIVE GARA acknowledged that it would cost the state $1.2 million each year, but asked if the analysis is correct will it actually save the state money. CHAIR GATTO replied that it would only cost more money if the students were placed in a regular classroom. He commented that it is almost an impossible question for Mr. Jeans to answer. REPRESENTATIVE GARA said that currently the analysis is that by allowing these children to go to boarding school less is being spent by the state than would be spent if the children attended schools in their local school districts. By expanding the program a larger number of children will be allowed to go to boarding school so even though the state will be paying more stipends and round trip airfares, the cost to the state will be less in the long term. He asked if he understands this correctly. Number 1809 MR. JEANS commented that this program is not an expansion of the program offering. He said these students are already attending Nenana and Galena. This proposal looks at funding the residential component of approximately the same number of students who currently attend. Mr. Jeans told the members that what the analysis says is if these schools closed their door tomorrow and all the students went back to their home communities, it would cost the state an additional $300,000 in both cases. It would cost the state an additional $600,000 through the foundation program to put these children back in their home communities, he reiterated. That is what the analysis says. REPRESENTATIVE WILSON asked what if the students went back to their home communities and did a correspondence program. The districts would not get full funding then, she commented. MR. JEANS replied that Representative Wilson is correct. If the students opted for a correspondence program its funding would be at a different level. CHAIR GATTO suggested that in all likelihood these students are going nowhere. The students are in the school and plan to stay there. MR. JEANS replied that is the reason the bill is before the committee. There is no assurance that Nenana would continue to operate based on the current funding levels. They need some additional support, he said. It also provides the legislature with an opportunity to do a case study to see how this program works. Number 1708 REPRESENTATIVE SEATON asked what funding mechanism will be used to fund this program. MR. JEANS replied that it would currently go into the boarding home component which is already in the budget, he said. REPRESENTATIVE GARA commented that he believes he has heard two conflicting answers to the same question. He asked if the state is currently paying one round-trip ticket per year and a monthly stipend for each student. He asked if the amount paid per student is changing. Number 1624 MR. JEANS replied that the amount per student is not changing, neither is the round trip airfare or the stipend. For example, in Galena there are currently 83 students, of those 83 students six qualify for the residential stipend and the one roundtrip airfare under the current program. This bill expands the program by allowing the other 77 students to be funded for the residential component. REPRESENTATIVE WILSON asked why only six are allowed the residential component now and with this bill the other 77 will be included. Number 1564 MR. JEANS under the existing program those six children do not have daily access to a secondary program where they live. These children qualify for a stipend. The other 77 children do have daily access to a secondary program where they live, so for those children it is a choice, he explained. CHAIR GATTO added that daily access merely means that the school offers classes in grades 9 through 12. MR. JEANS replied that is the correct definition. Number 1500 REPRESENTATIVE GARA withdrew his objection. Number 1492 REPRESENTATIVE SEATON moved to report HB 425, Version D, as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 425(EDU) was reported from the House Health, Education and Social Services Standing Committee. MS. MOSS said in response to Chair Gatto's request for a revised fiscal note that a new fiscal note will be provided before the bill is heard in House Health, Education and Social Services Standing Committee.