SB 46-EDUCATION FUNDING  4:05:28 PM CHAIR TOBIN announced the consideration of SPONSOR SUBSTITUTE FOR SENATE BILL NO. 46 "An Act relating to education funding; relating to the public education fund; relating to the base student allocation; and providing for an effective date." 4:06:00 PM SENATOR MATT CLAMAN, District H, Alaska State Legislature, Juneau, Alaska, sponsor of SB 46 provided the following statement: [Original punctuation provided.] Senate Bill 46  Sponsor Statement Version N "An Act relating to education funding; relating to the public education fund; relating to the base student allocation; and providing for an effective date." Senate Bill 46 will help address the public education funding crisis in Alaska. Public education funding is a significant topic for the state legislature. Currently, Alaska faces challenges with school closures and increasing class sizes coupled with the loss of experienced teachers and staff due to budget constraints. The legislature is constitutionally mandated to establish and maintain a system of public schools open to all children of the State. Currently, a key component of funding this constitutional mandate is the Base Student Allocation (BSA). The legislature established the BSA in 1998 and it is one part of a calculation that establishes the Basic Need of funding per student. But the BSA has been consistently underfunded and does not keep up with inflation. Since FY 11, the legislature has increased the BSA on four occasions totaling $230. According to the Anchorage School District, we would need to increase the FY 26 BSA by $1,963 to match the buying power of the FY 11 BSA. In the same 15-year period, we've added Outside-the-Formula (OTF) funding 11 times. The BSA structure with multiple OTF appropriations is confusing and ineffective. Schools, parents, and teachers are unable to effectively plan or budget for the next school year. Instead of trying to use the BSA, this bill proposes a single, direct appropriation for public education, similar to the funding process used for all other state departments. This bill will shift the focus of the funding discussion from the BSA to a well-defined total appropriation for public education. It will streamline the funding process from two steps to one. The funding formula considers factors such as the number of students, school size, cost of living, special education needs, and career and technical education will remain in place. In addition, the bill mandates increased transparency by requiring the governor to publish prior year education expenditures, adjusted for inflation, to serve as a baseline for the upcoming budget. Public education is our best investment in Alaska's future. This bill will establish a more transparent mechanism for funding public education that keeps pace with inflation and contributes to improved student performance. 4:09:10 PM SENATOR CLAMAN gave a presentation on SB 46. He moved to slide 2, FY25 Education Funding, a graph showing the percentage of funding from three main sources: State (62 percent), Local (25 percent), Federal (11 percent), and other (2 percent). He then moved to slide 3 and described how basic need and state aid are determined currently and the changes under SB 46: [Original punctuation provided.] The current structure starts with the statutory Base Student Allocation multiplied by the Adjusted Average Daily Membership to get the District Basic Need. From this total, deductions are made where appropriate for the required District Local Contribution and District Federal Impact Aid. This equation provides the District State Aid and the total for all 53 districts is the Total State Aid appropriated by the Legislature. One-time funding is added after this initial calculation. Under Senate Bill 46, we start with the Total State Aid appropriated by the Legislature and add in the Total Required Local Contributions and the Total Federal Impact Aid to determine the Total Statewide Basic Need. We then adjust the Total Statewide Basic Need for inflation as a starting point. Then multiply the inflation-adjusted Total Statewide Basic Need by the district AADM percentage of the total AADM to get the District Basic Need. And from each District Basic Need, make deductions for the required District Local Contribution and the District Federal Impact Aid to get the District State Aid. 4:10:36 PM SENATOR CLAMAN moved to slide 4, Current Structure - District State Aid, a chart showing FY25 Projected AADM, FY25 Basic Need, FY 25 District Required Local Contribution, FY25 District Deductible Federal Impact Aid, FY25 One-Time Funding and FY25 District State Aid for four Alaskan Schools. He compared the funding of the four schools [Original punctuation provided.] This slide illustrates the current structure for district state aid. We chose four school districts that illustrate different funding sources. The Anchorage district has both a required local contribution and federal impact aid. The Lower Yukon district has federal impact aid and no required local contribution. The Mat-Su district has a required local contribution and no federal impact aid. And the Southeast Island district has no required local contribution and no federal impact aid. The FY25 District State Aid in Column G includes last year's one-time funding. 4:11:16 PM SENATOR CLAMAN moved to slide 5, Senate Bill 46 - Statewide Basic Need. He said: [Original punctuation provided.] This slide illustrates the FY 26 Statewide Basic Need calculations using Senate Bill 46. We add the total FY 25 Appropriation for State Aid, the total Required Local Contribution, and the total Federal Impact Aid. This total for FY 25 Statewide Basic Need in Column E is then adjusted for inflation, shown in Column F. This may be the starting point for funding. 4:11:47 PM SENATOR CLAMAN moved to slide 6, Senate Bill 46 District AADM, a chart showing the FY26 Projected Statewide AADM, FY26 Projected District AADM, and FY26 District's Percentage of Statewide AADM of the four areas and said: [Original punctuation provided.] This slide illustrates the FY 26 calculation of each district's percentage of the statewide AADM by simply dividing each district's AADM by the statewide AADM. This percentage is then used to determine District State Aid, in the next slide. 4:12:04 PM SENATOR CLAMAN moved to slide 7, Senate Bill 46 - District State Aid, a chart showing FY26 Projected Statewide AADM, FY26 Projected District AADM and FY26 District's Percentage of Statewide AADM. He said: [Original punctuation provided.] This slide illustrates the FY 26 calculation of each district's percentage of the statewide AADM by simply dividing each district's AADM by the statewide AADM. This percentage is then used to determine District State Aid, in the next slide. 4:12:36 PM SENATOR CLAMAN moved to slide 8 Comparison - District State Aid, a chart showing FY25 District State Aid Current Structure (AADM x $5,960), FY25 District State Aid Current Structure (with one- time funding: AADM x $680), and FY26 District State Aid Senate Bill 46. He said: [Original punctuation provided.] This slide compares the FY 25 District State Aid under the current structure and the FY 26 District State Aid using Senate Bill 46. These calculations reflect the inflation adjustment from FY 25 to FY 26. These calculations are also set forth on the spreadsheet that we distributed to the committee. One of the key differences between the current structure and the Senate Bill 46 structure is how school districts will budget moving forward each year. Take the Anchorage School District as an example. The current proposed budget in the news is based on the statutory BSA, and many of the proposed cuts are based on an appropriation that does not include any one-time funding or any increase in the BSA. For Anchorage, that base amount is $49.1 million less than the amount they would use if the FY 25 one-time funding was part of their calculation. In contrast, under Senate Bill 46, Anchorage would probably start with flat-funding based on FY 2025-a total state appropriation for the district of $351 million. This starting point is $49.1 million greater than they are using today. And if the governor's initial budget started with a 3 percent cut to education statewide, then Anchorage could lower their total school budget by 3 percent starting with $341 million instead of $351 million. This starting point is still a substantially greater number that the starting point today- $302 million - and a more transparent approach for the public. Finally, if the governor's initial budget started with a 3 percent increase to education statewide, then the Anchorage School District could make an appropriate adjustment. 4:14:49 PM SENATOR CLAMAN concluded the presentation on SB 46 by saying: [Original punctuation provided.] In summary, the straight-forward, one-step approach of Senate Bill 46 will be more transparent for the public and more reliable for our public-school districts and Alaska's children. 4:15:10 PM SARENA HACKENMILLER, Staff, Senator Matt Claman, Alaska State Legislature, Juneau, Alaska, provided a sectional analysis of SB 46. [Original punctuation provided.] Senate Bill 46  Sectional Analysis Version I Section 1 AS 14.03.150(c). Property insurance required. Updates a statutory reference to conform with Section 2 Section 2 AS 14.17.410(b)(1). Public school funding. Modifies paragraph (1) reconfiguring the three funding sources of public education funding and removes the base student allocation (BSA). Redefines basic need as the amount of state aid calculated under new subsection (g) plus required local contribution and 90 percent of the district's eligible federal impact aid for that fiscal year. 4:15:55 PM MS. HACKENMILLER continued the sectional analysis of SB 46: [Original punctuation provided.] Section 3 AS 14.17.410. Public school funding. Adds a new subsection (g) outlining the calculations that the department shall use to determine state aid for each district. Section 4 AS 14.17.430. State funding for correspondence study. Replaces the public education fund with legislative appropriation as the funding source of state correspondence study programs. Section 5 AS 14.17.440(a). State funding for state boarding schools. Replaces the public education fund with legislative appropriation as the funding source of state boarding schools. Section 6 AS 14.17.500(a). Student count estimate. Updates a statutory reference to conform with Section 2. Section 7 AS 14.17.610(b). Distribution of student aid. Amends statute to remit any unused funds to the general fund rather than the public education fund. Section 8 AS 14.17.900(b). Construction and implementation of chapter. Removes requirement to appropriate funds to the public education fund. Section 9 AS 37.07.020(b). Responsibilities of the governor. Amends statute to remove the public education fund from the list of significant funds of which the governor must include projected balances each year. Section 10 AS 37.07.020. Responsibilities of the governor. Adds new subsection (h) requiring that the governor publish two reports per year in December and March, showing education expenses adjusted for inflation in prior year and current year. 4:17:03 PM MS. HACKENMILLER continued the sectional analysis for SB 46: [Original punctuation provided.] Section 11 Repeals the following sections and subsections in conformance with new language. 1. AS 14.17.300. Public education fund. 2. AS 14.17.400. State aid for districts. 3. AS 14.17.410(a). Public school funding. 4. AS 14.17.470. Base student allocation. 5. AS 14.17.480(b). Quality school funding. 6. AS 14.17.490(c). Public school funding adjustments. Section 12 Adds a new section to uncodified law stating that this Act applies to a contract that becomes legally binding on or after the effective date of this Act. Section 13 Effective date Provides an effective date of July 1, 2025. 4:17:37 PM SENATOR KIEHL thanked the presenters for a thought-provoking approach to addressing education funding. He asked whether SB 46 essentially reverses the current process by starting with the total desired spending amount and then dividing by the adjusted number of students, rather than starting with a per-student amount and adjusting it through various calculations. 4:18:23 PM SENATOR CLAMAN responded that broadly, yes, SB 46 shifts the approach. He explained that because districts rely on the base student allocation (BSA) as the starting point for budgetingand because one-time funding is not included in that basethey often present budgets based on a much lower figure than what the legislature ultimately approves. He stated that this leads to a lack of transparency and makes it difficult to discuss real increases or decreases in funding. He emphasized that while the change might appear to be a math exercise, it actually allows districts to more accurately communicate their financial realities. 4:19:44 PM SENATOR KIEHL expressed concern about the structure of SB 46, noting that it does not create a dedicated fund or limit the Legislature's appropriation power or the Governor's veto authority. He stated that, in practice, the true starting point for funding is whatever the Governor includes in the December 15 budget proposal, not what was allocated the previous year. 4:20:14 PM SENATOR CLAMAN responded that the starting point is partly what the Governor proposes but not entirely. He explained that while the Governor's December 15 proposal initiates the budget process, the Legislature retains appropriation authority and can shift the discussion. He noted that, for example, if the Governor proposed a $175 million cut from the prior year's spending, public reaction would be substantially different than current discussions. He concluded that although the Governor sets the initial figure, the Legislature can present an alternative starting point, and SB 46 would help create a more transparent dialogue with the public about education funding. 4:21:19 PM SENATOR KIEHL said that, based on his reading, SB 46 pools required local contribution with state aid and federal impact aid to calculate a total funding amount, which is then divided into a per-student flow to the district. Each district's required local contribution is then subtracted from the check it receives. He asked if his understanding of this portion of SB 46 was correct. 4:22:27 PM SENATOR CLAMAN responded that SB 46 does not function as described and clarified that he does not interpret the required local contributions as being pooled and then subtracted from a statewide total. He explained that each district's local contribution is accounted for individually when calculating that district's funding, similar to the current method based on per- student allocations. He stated that the state appropriation figure does not include the local contributions and used Anchorage, Juneau, and Fairbanks as examples where the local share is applied at the district level rather than from a pooled amount. 4:23:51 PM SENATOR KIEHL thanked the sponsor for clarifying his intent and noted that there may be a discrepancy between the bill's drafting and the sponsor's stated goals. He acknowledged that the explanation provided aligns more closely with current funding practices, which he found helpful. 4:24:53 PM CHAIR TOBIN opened public testimony on SB 46. 4:25:13 PM REBECCA EMERSON, representing self, Palmer, Alaska, testified with concerns on SB 46. She said she is a parent of a child with Down syndrome enrolled in special education in the Mat-Su Borough. She expressed concern about how special needs funding is allocated and whether it adequately follows the student. She observed limited resources, including insufficient staffing of teachers, paraprofessionals, and related service providers. She requested greater transparency and a focused effort to ensure special education students receive the resources they need. 4:25:54 PM CHAIR TOBIN closed public testimony on SB 46. 4:25:57 PM CHAIR TOBIN held SB 46 in committee.