HB 145-K-12 SCHOLARSHIP PROGRAM  8:11:53 AM CHAIR DICK announced that the first order of business would be HOUSE BILL NO. 145, "An Act establishing the parental choice scholarship program to be administered by school districts for the purpose of paying the cost of attending grades kindergarten through 12 at public and private schools; and providing for an effective date." 8:12:14 AM CHAIR DICK closed public testimony. 8:12:50 AM REPRESENTATIVE PRUITT moved to adopt the proposed committee substitute (CS) for HB 145, labeled 27-LS0223\G, Mischel, 1/24/12, as a work draft. REPRESENTATIVE SEATON objected for discussion. 8:13:09 AM REPRESENTATIVE WES KELLER, Alaska State Legislature, expressed his gratitude for the committee's work, on HB 145, by paraphrasing a quote from Ben Franklin, which read [original punctuation provided]: ... nothing is of more importance for the public weal, than to form and train up youth in wisdom and virtue. Wise and good men are, in my opinion, the strength of a state; much more so than riches or arms, ... REPRESENTATIVE KELLER deferred to staff for a review of the changes represented in the proposed CS. 8:14:49 AM ERNEST PRAX, Staff, Representative Wes Keller, Alaska State Legislature, said that Version G contains three primary changes. Directing attention to page 1, line 14, he indicated the first change, which is to clarify that the scholarship program requires a separate legislative appropriation, by inserting language to read: "Payments made under the program are subject to appropriation." Secondly, the language change on page 2, line 5, stipulates the residence requirement by removing "in" and altering the language to read: "…regardless of the attendance area or the school district in which the student resides." Finally, five lines of language have been added to page 4, lines 21-25, at the behest of Chair Dick, which exempts schools that have an average daily membership (ADM) of less than 50 students per year. CHAIR DICK explained his intent to protect small schools, which may be negatively impacted by passage of HB 145. Further, he pointed out that the three year limit will allow future legislatures to revisit the effects of the bill on the smaller schools. 8:18:46 AM REPRESENTATIVE P. WILSON asked whether the CS retains the language referring to a two year grace period, for schools with an ADM below 10. MR. PRAX answered, yes, and directed attention to page 3, lines 6-11. REPRESENTATIVE P. WILSON asked whether a school with an ADM of less than 10 would receive funding at the 10 student level, or receive reduced funding, but be allowed to remain open. MR. PRAX explained that a school dropping below the minimum ADM of 10 would receive full funding for a period of two years. REPRESENTATIVE P. WILSON surmised that a school with 9 students would be funded for two years, as though it had an enrollment of 10 students, but in the third year, funding would be discontinued. She stated her understanding that the third year is when the state would be made aware of how many schools would be closed. 8:21:46 AM CHAIR DICK explained that the intent of Section 2 of the bill, providing a three year sunset clause is to allow time to evaluate how well the program is working. The proposed AS 14.31.030, stipulating a two year period of grace, due to low enrollment, would not sunset. REPRESENTATIVE P. WILSON underscored the need to provide clear intent in the proposed language, and asked for further explanation of how the two aspects of the bill might work. MR. PRAX pointed out that the language on page 4, lines 21-25, is applicability language, which stipulates that schools with 50 or less students when the bill takes effect, could not participate for the first three years. Following the third year, the legislature will have the opportunity to review the program and decide whether to continue the program, and then the schools with less than 50 students could participate. CHAIR DICK assured that there would not be a mass exodus from public schools, with the passage of this bill and said that the intent is to provide a three year window in order to grasp the effects of the legislation. Following the initial three years adjustments could then be made. REPRESENTATIVE P. WILSON maintained her concern and said that following the third year small schools could be severely impacted. 8:26:19 AM REPRESENTATIVE FEIGE offered his understanding, stating that the bill would not apply to small schools for the first three years. If in the fourth year the enrollment drops below 10, there is a waiver to allow schools to remain open for two additional years. 8:27:15 AM REPRESENTATIVE SEATON said he reads the bill as a directive to a parent, that if a family resides in a community with a school size of less than 50, the program is not available. CHAIR DICK agreed that small schools are on the cusp, and not every parent will have the choice of participating in the program. He further agreed that caution must be taken to avoid a situation that would eliminate a public school as a choice, due to lack of enrollment. 8:30:19 AM REPRESENTATIVE CISSNA expressed concern, and objection to the amendment, due to the pace with which the bill is being moved through committee. She asked to have further information provided, time allowed to review the information, and department and school officials made available for comment. CHAIR DICK pointed out that, particularly considering NCLB requirements, a one size solution doesn't fit all. 8:32:28 AM REPRESENTATIVE PRUITT asked whether Representative Cissna objects to the proposed CS, or the amendment, which is not yet under discussion. REPRESENTATIVE CISSNA suggested that a special sub-committee to review all of the changes would be helpful, and stated that she does not object to the proposed legislation; the committee process is a concern. 8:33:48 AM JEAN MISCHEL, Attorney, Legislative Legal Counsel, said she was available for questions. ANNETTE KREITZER, Staff, Representative Alan Dick, Alaska State Legislature, on request of legal counsel, clarified the committee's question asking how Section 2 of the bill, and proposed AS 14.31.030, work together in practicality. 8:34:15 AM MS. MISCHEL explained that the applicability provision, Section 2, excludes schools with fewer than 50 students for a three year period after the effective date of the act. The proposed AS 14.31.030, stipulates that the school size, for purposes of state aid calculation, would not change if the size falls below 10 for a period of a two year period. To a follow-up question, she pointed out that proposed AS 14.31.030 is a permanent provision. 8:37:53 AM REPRESENTATIVE SEATON asked if it is correct to interpret Section 2 to mean that parents in communities with fewer than 50 students on the school rolls do not qualify for participation, during the initial three years of the program. MS. MISCHEL said that is correct. REPRESENTATIVE SEATON queried whether constitutional due process issues would arise, given the exclusionary restriction of providing a state benefit only to larger communities. MS. MISCHEL responded that HB 145 may present a valid equal protection question. A court would not necessarily invalidate the provision; however the legislature would need to articulate legitimate rationale related to the provision. One policy rational in question would be the potential failure of an existing public school, particularly if it is the only public school available in the area, and the effect on the remaining students. Other questions might also arise, but she said if the legislature has a legitimate purpose, and a provision is tailored to that purpose, it would be upheld by the court. 8:41:54 AM CHAIR DICK observed that a line has been legally drawn, and cited the ADM limit of 10. Thus, discrimination already exists for anyone who lives in a village with less than 10 students. 8:42:16 AM REPRESENTATIVE PRUITT asked whether there are any public schools with less than 50 students located in proximity to an established private school, which might be effected. Further, he questioned whether a private school could successfully be established in a three year period. MR. PRAX deferred to legal counsel. MS. MISCHEL responded that the applicability provision [Section 2] excludes families from the program for a three year period. 8:44:19 AM CHUCK KOPP, Staff, Senator Fred Dyson, Alaska State Legislature, added that the language under applicability clearly indicates that a parental choice scholarship may not affect a public school. Thus, if public enrollment is reduced because a child's parents have chosen another school, the public school funding will not be impacted for a period of three years. Referring to the requirement of an ADM of 10 students, he said these are two very different provisions, however, in neither case does it remove the ability of a parent to make a choice for the education of their child. MS. MISCHEL said the applicability provision [Section 2] is not limited to a particular aspect of the program. The parents who have students in a public school with an ADM of 50 or less may choose to send their student to a private school, but no scholarship funding would be available for a three year period to support that choice. She indicated that the section could be rewritten from applicability and be made a temporary protection section; similar to proposed AS 14.31.030. MR. KOPP offered that the intent is to promote parental choice, and it appears that the opportunity will be limited for three years, as written. MS. MISCHEL responded yes. She referred to Representative Pruitt's question, regarding size, proximity of schools, and whether there are families that would be affected, and said an EED response would be appropriate. 8:48:10 AM CHAIR DICK offered his understanding that in states where this type of legislation has been implemented, reports indicate that everyone involved has benefited and the educational outcome has been good. 8:48:59 AM REPRESENTATIVE CISSNA asked whether the bills adopted by other states are the same as what is before this committee and if the reports are from states with similar rural conditions as Alaska. CHAIR DICK responded no, and added that there is no state like Alaska. 8:49:41 AM REPRESENTATIVE P. WILSON suggested aligning the bill aspects under discussion; the hold harmless clause and the applicability section. CHAIR DICK said: We're talking about a five year period. Three years where it's just hold harmless - let's figure out how this thing works - and after that there would be a two year grace period for communities to adjust. MS. MISCHEL interjected that the two year period is a permanent provision. Thus, if a schools ADM drops below 10, it will be held harmless for a two year period from that point; it is a floating two year period after the first three year exclusion. 8:52:07 AM REPRESENTATIVE SEATON stated his understanding that the funding is based on the residency of the person not the location of the school. A qualified boarding, correspondence or other private school would receive a scholarship amount for an enrolled student, at the rate for which the student's home district is budgeted. He asked whether it is correct that there is no requirement that a private school establish in the same community in which the enrollment reduction occurs. MS. MISCHEL concurred and said that the funding is based on where ever the student retains residency; their home district. The private school could be located anywhere in the state. Transportation costs may discourage this type of scenario, unless a boarding school situation was entered into. The higher, rural funding would be paid to an urban boarding school, should a student transfer in, and retain a remote resident address. 8:55:09 AM REPRESENTATIVE P. WILSON referred to page 3, line 6, and requested a further explanation of Sec. 14.31.030. MS. MISCHEL said that if a student count falls below 10, as a result of the parental choice scholarship, the school is held harmless. The school will be treated, for the purposes of the school size factor, as having 10 students in order to avoid closure. The funding, for 10 students, will be received for a period of two years, during which time the enrollment may increase, or the school would be closed. REPRESENTATIVE P. WILSON clarified that this represents a floating two years. MS. MISCHEL indicated that the two year period could begin at any time, through the life of the program. 8:56:59 AM REPRESENTATIVE SEATON stated that under this section the school would be treated as having 10 students, in regards to funding received for the district cost factor, but would not receive the ADM funding for students who are not actually attending; the ADM funding would be directed to the student's school of choice. MS. MISCHEL explained that the section only speaks to the school size factor, not the district cost factor; the ADM is the reference point. REPRESENTATIVE SEATON said: If a school went down to five, they're not going to be funded as if they had ten students in the school. The cost factor to the district will still remain the same, but they're only going to get the ADM and the funding for five students not for ten students. ... We're really only maintaining the district cost factor ... not the average daily membership, as if it was fully ten. 8:59:07 AM CHAIR DICK reported that he has experienced life in a village where a school was closed, and the cost factor is far reaching, as it includes many factors including legal filings. He stated his understanding that a school would receive continued funding for 10 students, and asked if that is correct. 8:59:49 AM MS. MISCHEL said that the proposed language only speaks to the school size factor, under AS 14.17.450; but the size creates an adjusted student count. There is no multiplier for a school with a student count of 10-20 students, thus, AS 14.17.450 would normally require that a school falling below 10 be included within the same district with the lowest ADM. She said this action would not occur for a two year period. CHAIR DICK opined that given the two year grace period, school districts would have ample opportunity to plan ahead. MR. PRAX offered that the intent is to have a school continue to be funded at the 10 student level, and if the language needs to be changed to reflect that intent an amendment would be welcomed. 9:01:40 AM The committee took a brief at-ease at 9:01 a.m. CHAIR DICK reported that the sponsor of the bill does not support an amendment for the section under discussion. 9:02:57 AM REPRESENTATIVE SEATON turned to page 2, lines 9 and 31, which indicate allowable tuition, and stated his understanding that a private school would receive the same basic aid and local contribution that would be applicable to a public facility, including correspondence schools. However, he pointed out, it appears that a private correspondence school would receive 100 percent of allowed funding, whereas public schools currently receive only 80 percent, under the funding formula. MR. KOPP said it would be possible that the private program could receive 100 percent funding. REPRESENTATIVE SEATON reiterated that public correspondence programs are only allowed funding at the rate of 80 percent of the ADM. MR. KOPP conjectured that tuition for a private correspondence school would be competitive, and suggested that establishing a specific percentage that could be funded would eliminate the concern. REPRESENTATIVE SEATON suggested that private tuition costs may experience a surge to reflect the influx of state funding, and the structure of the bill allows for funding above what state institutions are allowed. 9:08:57 AM REPRESENTATIVE FEIGE concurred that the tuition of private correspondence programs may rise. The choice that parents and students will make, remains unknown, he said, and underscored the importance for competition. He suggested equalizing the funding factor to mitigate the concern. EPRESENTATIVE SEATON said it does not appear that an amendment has been crafted to address this issue, and underscored his concern for the language contained in the proposed CS. 9:10:51 AM REPRESENTATIVE KELLER pointed out that the finance committee would revue how the education funding formula works in the bill. REPRESENTATIVE SEATON held that the education committee should be crafting the bill appropriately, prior to passing it to the next committee of referral. REPRESENTATIVE P. WILSON agreed that establishing appropriate policy in this committee is important. Further, she said that private schools will be allowed to discriminately enroll students, even though public funds are being received. REPRESENTATIVE PRUITT pointed out that charter schools are not open enrollment institutions, and receive public funds; albeit on a different scale. 9:13:52 AM REPRESENTATIVE SEATON moved to page 3, line 29, and read: The department shall adopt regulations necessary to carry out the program in a manner that ensures the highest number of student and school participation, REPRESENTATIVE SEATON said this is problematic, as the department is being directed to write regulations that will be as detrimental as possible to the public schools; the use of "shall" and "ensure" are not appropriate directives for the statute. MR. KOPP responded that the proposed language refers to the administrative process, and is a clear statement of legislative intent to provide direction for efficiencies in process for how schools of choice can be established. Operational guidance of a school will be made user friendly through the adoption of this language. REPRESENTATIVE SEATON said that the language does not come under the intent section of the bill; it does, however, create a mandate to the department, and represents a problem. [A brief discussion ensued regarding the possibility of offering an amendment.] 9:23:23 AM The committee took an at-ease from 9:23 a.m. to 9:30 a.m. 9:30:22 AM REPRESENTATIVE SEATON removed his objection. Without further objection, Version G was before the committee. 9:31:37 AM REPRESENTATIVE FEIGE moved Conceptual Amendment 1, to page 3, line [28], to read: The department shall adopt regulations necessary to carry out the program including 9:32:12 AM REPRESENTATIVE P. WILSON objected to re-read the proposed amendment. She then removed her objection. Without further objection, Conceptual Amendment 1 was adopted. 9:33:13 AM The committee took an at-ease at 9:33 a.m. 9:34:05 AM REPRESENTATIVE CISSNA asked for departmental response regarding how special needs students, requiring services, would be affected by HB 145. 9:35:03 AM REPRESENTATIVE SEATON requested that department representatives respond to questions regarding travel, specifically how the participating school requirement would apply and also considerations related to travel pertaining to attending a boarding school. 9:35:19 AM [HB 145 was held over.]