HB 93-CHARTER SCHOOLS  9:15:59 AM CHAIR GATTIS announced that the final order of business would be HOUSE BILL NO. 93, "An Act relating to the authorization, monitoring, and operation of charter schools." [Version O was before the committee, adopted as a work draft on 3/15/13.] 9:17:34 AM REPRESENTATIVE KITO III moved to adopt the proposed committee substitute (CS) for HB 93, Version R, labeled 28-LS0354\R, Mischel, 3/20/14 as the working document. There being no objection, Version R was before the committee. 9:18:10 AM The committee took a brief at-ease. 9:19:15 AM CRYSTAL KENNEDY, Staff, Representative Lynn Gattis, Alaska State Legislature, on behalf of Representative Lynn Gattis, prime sponsor of HB 93, presented the committee substitute (CS) for HB 93, Version R, paraphrasing from a prepared statement, which read [original punctuation provided]: All of the changes made in this CS incorporate the portion of the Governor's bill, HB 278, regarding charter schools and the amendments that this committee made to HB 278 so that this bill now is the stand alone bill that mirrors the charter school portion of the CS to HB 278. The first section requires that a district make its decision to deny or approve a charter school application within 60 days of that application being submitted. This section also allows the Commissioner of the Department of Education and Early Development to approve a charter school that was initially denied by a local district and provides for the State Board of Education to become the operator of the charter school. The second section lays out the appeal process through the Commissioner's office. Section Three is the Committee amendment on securing a charter school right of first refusal for leasing of available space of school district facilities and that the district can charge a reasonable fee that reflects the true operational costs of that facility. 9:20:35 AM MS. KENNEDY, paraphrasing from a prepared statement, continued to read [original punctuation provided]: Section 4 limits the amount that a district can charge in indirect cost fees to 4% and includes language that state funding that is generated for special needs, vocational and technical instruction and construction or major maintenance should be part of the funding directed to charter schools. Section 5 requires that school districts formulate policies and thoughtfully address the transportation challenges of their charter school students. Districts would be charged with coordinating transportation routes and transportation availability as best they can within their current transportation plan to provide transportation where and when feasible. If not, the districts will have to forfeit the portion of their transportation funds generated by the number of students attending the charter school and hand that money over to the charter school. It does not require the district to specifically provide transportation for students but they do have to allow charter school students to take advantage of normal bus routes whenever reasonably possible. Section 6 addresses bonding by a municipality or borough for construction, additions and major rehabilitation projects for charter schools. This will allow for a 70% debt reimbursement of bonds for charter school projects. 9:22:00 AM MS. KENNEDY, paraphrasing from a prepared statement, continued to read [original punctuation provided]: Section 7 decreases the minimum number of students required for establishing the funding rate for a charter school within its first three years, and allowing the adjusted student count to be counted at the same rate as for 150 students. Section 8 speaks of the repeal of the HSGQE and Section [9] provides for an effective date of Sept. 1, 2014. CHAIR GATTIS, in response to a question, reminded members that the committee is working from Version R. 9:23:30 AM REPRESENTATIVE KITO III added clarification that Section 8 will repeal the sunset for the charter school facilities program and not the HSGQE [Section 3, ch. 91, SLA 2010]. MS. KENNEDY offered to provide the information. 9:24:10 AM REPRESENTATIVE SEATON referred to page 9, line 21 of Version R, to paragraph (18) relating to the 70 percent reimbursement for schools. He expressed concern from two districts that this language creates a differential between the alternative schools and the charter schools since the charter schools can obtain bond reimbursement rates at a higher rate. Under certain circumstances, alternative schools may need to be eligible for the same bond reimbursement rate as charter schools. CHAIR GATTIS asked Representative Kito III to respond. 9:26:00 AM REPRESENTATIVE KITO III clarified the issue he had intended to address is that charter schools are often located in leased facilities, but alternative schools are typically located in district facilities. The amendment for the 70 percent [reimbursement of payments on tax-exempt bond] provision was to allow for a pathway to charter schools to be built and incorporated as a district facility to avoid onerous lease costs. CHAIR GATTIS agreed and said in her district the charter schools are in leased buildings. REPRESENTATIVE SEATON acknowledged that he had supported the amendment. He pointed out that alternative schools are often focused on recapturing student attendance and are separate from charter schools. If a school district chose to bond and build an alternative school the bonding would be at the 60 percent reimbursement level and not the 70 percent reimbursement ratio. A specialized mission may need to be defined to include other alternative facilities, along with charter schools. It was not considered previously. CHAIR GATTIS disagreed, and said the Matanuska-Susitna Borough School District's (MSBSDs) alternative school, Valley Pathways, is being built and bonded under the 70:30 bonding structure. REPRESENTATIVE SEATON acknowledged that the MSBSD is the only area that is expanding and allowed to operate under the 70:30 percent bonding structure but no other district would be able to obtain that bond structure. 9:30:37 AM CHAIR GATTIS stated her understanding that schools could obtain the 70:30 bonding structure if the charter school had sufficient students, but if not, one option would be to offer alternative school, but it wouldn't be eligible for the reimbursement at 70:30. 9:31:05 AM REPRESENTATIVE SADDLER suggested this measure will be appropriate, particularly if districts are shrinking and space is becoming available in the current facilities. 9:31:38 AM REPRESENTATIVE KITO III reiterated the difference is that many charter schools are leasing existing space. He offered his belief that with declining enrollment the school could still use the 70:30 bonding reimbursement provision to renovate an existing building to accommodate an alternative program. If the school is overbuilt for the district, the charter school wouldn't qualify to build a small alternative school using the 70:30 bonding; however, the bill was written to assist charter schools paying lease payments to be placed in a district facility. 9:32:43 AM REPRESENTATIVE SEATON agreed with the goal to equalize the opportunity for charter schools. However, it might disenfranchise some alternative schools who can't qualify for the reimbursement at 70 percent, except in some districts such as the MSBSD, since the overall vacancy space in a district might be due to vacancies in a number of communities. 9:34:04 AM REPRESENTATIVE P. WILSON turned to the charter school denial process in Section 1 that allows the Alaska State School Board to authorize and become the school board for that school. She suggested that statute would need to be amended to allow for that action. 9:35:50 AM MS. KENNEDY offered her belief that she might be referring to page 2, line 17, of HB 93, Version R. which read: (f) Except as provided in (g) of this section, the state board shall operate a charter school that has been approved by the state board on appeal of a denial of the charter school applications by the local school board under the laws governing the operation and maintenance of a charter school, as if the state board were a school district. 9:37:02 AM REPRESENTATIVE P. WILSON asked whether AS 14.03.255 has been amended since it doesn't currently allow them to operate. MS. KENNEDY deferred to the EED to answer. CHAIR GATTIS preferred to hold the question. 9:37:40 AM REPRESENTATIVE KITO III said EED operates the Mt. Edgecombe boarding school as a public school. In addition, the department has the ability to take over operations of schools that are underperforming. He indicated the department could expand on this but he believed the department has the ability to operate as a school. 9:38:14 AM REPRESENTATIVE P. WILSON referred to proposed Sec. 7, [beginning on page 9, line 31 through page 10, line 2 of Version R], which read, "(d) If a charter school has a student count of more than 74 [120] but less than 150 for the current year and is in the first three years [YEAR] of operation or had a student count of at least 75 [150 OR MORE] in the previous year of operation,". She interpreted this to mean the school could use a count for three years if under 75 students. She explained that in small districts it is difficult to begin a charter school given the demographics of the classroom such that some K-6 charter schools wouldn't ever be able to reach 150 students. She suggested reducing the figures to allow smaller charter schools to operate. 9:40:04 AM CHAIR GATTIS restated the question is whether to change the count that a charter school needs to a lower number than the bill indicates. Although she didn't object, she acknowledged that there are usually financial implications. REPRESENTATIVE KITO III deferred to the department, but expressed concern that the operating cost for charter schools being established with too few students would be excessive in comparison to the number of students being served. Further, it would be difficult to operate with the amount of money received in the BSA although he was unsure of the dividing line for the minimum number of students. CHAIR GATTIS remarked that if a school can't afford to operate it may be self-limiting. 9:41:27 AM REPRESENTATIVE SEATON related the effect that changes for charter school size has had on the Kenai Peninsula School District (KPSD). In one instance, the district needed to transfer $200,000 more per year than anticipated due to the small size of the charter school, which is less efficient to operate. He said that reducing the size means the districts will face more per student costs due to the inefficiencies. The committee took an at-ease from 9:41 a.m. to 9:49 a.m. 9:49:30 AM REPRESENTATIVE P. WILSON moved to adopt Conceptual Amendment 1, on page 10, line 1, to delete "three years" [YEAR] of operation" and to delete "150" and replace it with "75." She said this would assist small charter schools working to grow to K-6. CHAIR GATTIS objected for discussion purposes. 9:50:55 AM SUSAN MCCAULEY, Director, Teaching and Learning Support, Department of Education and Early Development (EED), answered that this is not her area of expertise, but it is a school finance consideration with a potential fiscal note implication. She understood the intent of Conceptual Amendment 1, to remove a potential barrier that charter schools face. She reported that four charter schools have been operating under the 150 attendance requirement that affect the districts. She was unsure of the fiscal implications of the Conceptual Amendment 1. 9:52:17 AM REPRESENTATIVE KITO III stated he was also unsure of the fiscal impact. He offered that the fiscal formulas being impacted are shown in AS 14.17.440. He said that student population base numbers between 75 and 150 equals a base amount of $122.85 and with student size range of 150-250, that the base amount is $218.00. 9:53:41 AM REPRESENTATIVE P. WILSON asked for ramifications to Conceptual Amendment 1 that would change the number of students required in a charter school from 150 to 75 since the smaller school districts have difficulty reaching 150. 9:54:47 AM ELIZABETH SWEENEY NUDELMAN, Director, School Finance and Facilities Section, Department of Education and Early Development (EED), stated her understanding the average daily membership of 75 is for charter schools to receive increased funding and have an opportunity to grow. 9:56:06 AM REPRESENTATIVE P. WILSON clarified that it would be limited to the first three years of operation. MS. NUDELMAN read," ... in the first three years or had a student count of at least 75 [150 OR MORE] in the previous year of operation. She related her understanding that once the charter school attains and maintains a student count of 75, the charter school would be funded at a higher level than currently established in law. 9:57:15 AM REPRESENTATIVE P. WILSON withdrew Conceptual Amendment 1. 9:57:27 AM REPRESENTATIVE LEDOUX asked whether funds would be made available if the founders intentionally want to have a small school. MS. NUDELMAN answered yes; that charter schools of any size are supported through a number of opportunities allowed under the funding chart. The lowest funding for the charter school would be an increase of 1.18 per average daily membership (ADM), she said. REPRESENTATIVE LEDOUX asked whether a charter school of 25-50 could exist. MS. NUDELMAN answered yes; that the formula for the ADM would be adjusted by a 1.18 increment. She acknowledged some practical considerations would come into play. 9:59:30 AM CHAIR GATTIS closed public testimony on HB 93. 10:00:17 AM REPRESENTATIVE REINBOLD moved to adopt [Conceptual] Amendment 2 to change the effective date from September 1, 2014 to July 1, 2014. REPRESENTATIVE P. WILSON objected for discussion. 10:01:18 AM MS. KENNEDY explained that [Conceptual] Amendment 2 is necessary since certain dates work better for school districts. It would align the district with the budget year on July 1 of a given year instead of September 1, 2014, since at that point the school year would already have started. 10:02:12 AM REPRESENTATIVE P. WILSON asked whether [Conceptual] Amendment 2 would allow the department much time to write regulations to comply with statute. She referred to page 10, line 19, to the effective date clause. MS. KENNEDY referred to language on page 10, proposed Sec. 10, which read, "This Act takes affect September 1, 2014." The proposed Amendment 2 would change the effective date to July 1, 2014. 10:03:28 AM The committee took a brief at-ease. CHAIR GATTIS acknowledged concerns were raised on the date. 10:05:56 AM REPRESENTATIVE REINBOLD moved to withdraw [Conceptual] Amendment 2. REPRESENTATIVE SEATON objected for discussion purposes. He asked whether the change is an application to the formula and may not require separate regulations. REPRESENTATIVE SEATON withdrew his objection. There being no further objection, [Conceptual] Amendment 2 was withdrawn. 10:07:30 AM REPRESENTATIVE REINBOLD moved to report HB 93, Version R, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 93(EDC) was reported from the House Education Standing Committee.