HB 477 - ALLOWABLE LOCAL EFFORT FOR SCHOOL FUNDING DIANNE LINDBACK, STAFF TO REPRESENTATIVE ULMER, said, "HB 477 would raise the cap on local contributions. As you know, there are two provisions in statute which control local contributions to schools. One is a minimum required contribution and the other is a maximum allowable contribution. This bill addresses that discretionary or allowable portion over the minimum required. The federal government has a cap of 25 percent on this additional local contribution, and the purpose of that cap is to ensure that there's relative parity between school districts in the state, so that those communities that have a lot of money don't end up with schools that are funded way in excess of those communities that are perhaps less endowed financially. So we need to keep within that federal cap of 25 percent. The current statute sets the allowable discretionary local contribution at 23 percent of the basic need and this bill would raise it to 24 percent. And the Department of Education has advised that that would still keep us underneath the cap, so that we're not violating that federal control. There are several districts that are really right at the cap now, that this would probably be very useful for and this, besides Juneau, is Fairbanks, Kenai, Ketchikan and Sitka. For Juneau, this would mean that we could contribute an additional $289,957. So this will help offset the costs of inflation, the way that's eroding our ability to maintain our current programs." Number 079 REPRESENTATIVE CYNTHIA TOOHEY said, "I'm nervous about removing this 23 percent and going to 24 (percent) when we haven't shown any signs or desires to cut anything. In my district, it would be very upsetting, I think, to do this at this time." MS. LINDBACK said, "This does not affect the general fund at all." CHAIRMAN OLBERG clarified, "I think we're talking local option again where each individual district is simply being given the option to go to 24 percent, instead of 23 percent. Some districts may, some districts may not. To the extent that we can avoid mandates, I think we're all better off." MS. LINDBACK proceeded, "There's also another reason why this would be additionally desirable. If the instructional unit is essentially short funded or underfunded so that we come out with a unit, as the Governor has proposed at $59,800, the Department of Education...would have to by regulation reduce the amount that a local district can contribute. So they go down proportionately, is what I'm trying to say. So if we are able to allow our districts to compensate for some of that, the only way we can do it is in this local option." Representative Con Bunde joined the committee at 1:16 p.m. REPRESENTATIVE JOHN DAVIES said, "I think it is the case...around the state that real cuts have been made, especially if we level fund the instruction unit, that's going to fund additional real cuts and this just allows the local option to decide whether or not they want to try to offset some of those cuts with increased local effort." REPRESENTATIVE BUNDE said, "In the Anchorage area, they do not fund up to the maximum local level at this point, so this bill may not have an impact there. I'm concerned that it will increase the disparity where these folks, who chose to make up the larger local contribution." Representative Fran Ulmer joined the committee at 1:18 p.m. REPRESENTATIVE JERRY SANDERS asked, "If we pass this, does this mean we can cut the budget one percent?" Number 180 REPRESENTATIVE FRAN ULMER, SPONSOR OF HB 477, said, "Remember not all districts are situated in the same way in this state. Some are at the cap and some aren't. Some are in a position to use this and choose to use it, and others aren't or won't. So it's not like an across the board assistance of one percent to every district in the state." REPRESENTATIVE SANDERS proceeded, "If we did cut, they'd be free to make it up, right?" REPRESENTATIVE ULMER said, "If you allow the districts to move up one percent, it will help take the pressure off some districts, absolutely. But it doesn't replace as much as we're looking at in terms of potential cut." Number 199 REPRESENTATIVE BUNDE said, "I certainly applaud those districts that not only are at their cap, but would be willing to make a greater contribution and as such, I would support this legislation. I do think it's a double edged sword though, because if we support this, there's more of an inclination to cut state support, which may be coming anyway. So we're allowing local districts to make up what the state will no longer provide, and I think it will make this gap between those that are funding clear to their max and those that are not, even more apparent and will cause some political pressure..." REPRESENTATIVE SANDERS asked, "Is there a reason for not raising them to 25 (percent) to the cap?" REPRESENTATIVE ULMER replied, "What we're trying to do is not get so close to the federal percentage as to really create a possibility that we have offended this discrepancy of percentage for the federal level and that might throw us into a litigation situation... I think it's to just create kind of a little cushion so we're not really right at the max." Number 248 DUANE GUILEY, DIRECTOR OF SCHOOL FINANCE, DEPARTMENT OF EDUCATION, stated, "The previous question about the 25 percent limit: Certainly, the state legislature has the opportunity to increase the cap to 25 percent, however, I would remind you that when districts are preparing their budget, we are in fact, working on a budgeted figure and when we actually calculate our disparity standard, it's well after the end of the school year. If we were to raise our limit to 25 percent, it may actually require a retroactive repayment of local dollars from the district to the municipality after the dollars have already been spent. That's why the current threshold is 23 percent...there would be no harm in raising it to 24 percent and for that reason the Department of Education does support this legislation; in that on a simple basis it provides an opportunity for those that wish to further help themselves to do so without putting the burden on the state. And we don't anticipate that it will harm our disparity standard or put us out of compliance with federal statutes." REPRESENTATIVE TOOHEY asked, "Do the citizens have a chance to vote on it (HB 477)? REPRESENTATIVE ULMER said, "It's up to each city council and borough assembly as to whether or not they want to do it..." Number 300 REPRESENTATIVE DAVIES moved to pass HB 477 out of committee with individual recommendations. There were no objections. ADJOURNMENT CHAIRMAN OLBERG adjourned the meeting at 1:26 p.m.