HOUSE BILL NO. 191 "An Act relating to charter schools; and providing for an effective date." Members were provided with a proposed committee substitute on May 17, 1999 (copy on file). REPRESENTATIVE FRED DYSON, SPONSOR, noted that the proposed committee substitute had not been adopted. Co-Chair Mulder MOVED to ADOPT proposed committee substitute 1-LS0598\N, 12/17/99. There being NO OBJECTION, it was so ordered. Representative Dyson noted that the committee substitute removed items from the original legislation that reduced the fiscal cost. He maintained that the committee substitute now contains 3 or 4 essential items. Section 1 would increase the number of charter schools to 60, double the current number. He observed that charter schools have had difficulty obtaining leases and financing due to the five-year contract limit. The committee substitute would extend the contract period from 5 to 10 years. All of the charter schools have struggled financially. Charter schools receive approximately half of the per pupil funding available to school districts. The legislation would require school districts to demonstrate to charter schools where the funding is being used. Charter schools would be allowed to negotiate with school districts for services. For instance, the charter school could negotiate with the school district to provide its own library services or use other available library services in order to reduce their cost of services. He recounted a situation in which a charter school located next to a public library opted to use the public library instead of a school district library. The charter school also contracted with a health club for the use of its gymnasium. Co-Chair Mulder asked the primary mission of charter schools. Representative Dyson stated that the mission is to allow parents to set the primary direction for their children's education. The faculty and parents decide the emphasis, which surrounds the core information required by state law. Co-Chair Mulder questioned if operation of charter schools would be enhanced by the amendments, which would assure a fair share of the allocation of funds. Representative Dyson stated that he could not demonstrate that charter schools have not received a fair portion of pupil costs. He acknowledged concerns by charter school members that they have not received a fair share. Representative Austerman questioned if charter schools would have to follow standards such as exit exams. WES KELLER, STAFF, REPRESENTATIVE FRED DYSON clarified that charter schools are public schools and are subject to the same requirements as other schools. Charter schools would be required to meet exit exam qualifications. Vice Chair Bunde questioned if current charter schools are nearing the end of their 5-year contracts. Representative Dyson responded that he did not know of any charter schools that had more than a 2-year (leasing) contract. Vice Chair Bunde asked if there is a minimal requirement for operation of charter schools. Representative Dyson noted that there is no requirement for continuation of a charter school. He did not think that much effort was needed to protect leaseholders. The most difficult issue for charter schools is the start up cost. In response to a question by Representative Williams, Representative Dyson noted that the legislation would be permissive and allow school districts and charter schools to work out arrangements regarding services, such as library or gymnasiums services. Representative Dyson acknowledged that the Anchorage School District is supportive of the contract extension and the increase in the number of allowable charter schools. They are not supportive of accounting requirements to identify costs. The Department of Education and Early Development is supportive of the cost accounting requirement. Mr. Keller explained that one purpose of charter schools is to provide a vehicle for reform of public schools and innovation. Each charter school can work with the school board of their area. Involved parents are passionate and active. Representative Dyson further explained that the intent of (section 4) the legislation is to allow negotiations with school districts to transfer funds from the school district to the charter school for services not provided by the school district. Co-Chair Therriault observed that no fees are charged at municipal libraries. He noted that some of the funding used to operate schools comes from the local government contribution. Representative Dyson concluded that the amount of money received from the school board would go up because they are not utilizing the service. Representative J. Davies observed that there would be a problem if the majority of students utilized the municipal library. He pointed out that there is an equity issue. He referred to page 2. He noted that the name of the teacher is required. He questioned why the teacher's name is part of the contract. Mr. Keller noted that name of the teacher is required under existing law. Representative Dyson added that charter school teachers are required to be members of the teachers' bargaining unit and are considered employees of the school district. He noted that Kansas City has merged its municipal and public school libraries. He stressed that few charter schools would have access to public libraries. GREG MILLR, AQUARIAN CHARTER SCHOOL, ANCHORAGE testified via teleconference in support of the legislation. He noted that the Aquarian school supports 210 students in grades K-6. This is the third attempt to improve the charter school law. He emphasized that charter schools are still required to meet academic and fiscal standards. He clarified that the name of the teacher is only included on the start up application. Mr. Miller spoke in support of amending section five to extend contracts to 10 years. He observed that it is difficult to negotiate leasing contracts because many landlords will not consider contracts of short duration. He spoke in favor or deleting the sunset clause. He noted that every charter contract comes up every year. Contracts can be terminated for good cause. He maintained that checks and balances are in place. He emphasized that charter schools favor provisions to allow the use of other public buildings as long as they meet code requirements. Mr. Miller spoke in favor of other provisions in the bill. He referred to section 4, which would require accounting of services by school districts. The indirect cost is established by the Department of Education and Early Development. The Anchorage School District's indirect cost is 4.39 percent. He stated that the indirect cost for school administration services is reasonable. The use of this amount would not require an increase of work by the school district. The indirect cost could be higher in rural areas. He acknowledged that it would cost school districts to do the accounting, but emphasized that charter schools should know what they are getting for their money. He stressed that charter schools should not be assessed more than the indirect cost of 4.39 percent and recommended that the administrative costs be capped at the indirect cost. He noted that their school has been successful at opting out of services. Mr. Miller noted that the Family Partnership Charter School also supports the legislation. (Tape Change, HFC 00 - 21 Side 1) Vice Chair Bunde felt that it could adversely affect students to be in a charter school that did not continue and questioned if Mr. Miller would support a minimum requirement for operation of charter schools. Mr. Miller responded that administrative difficulties would be the only reason a charter school would not succeed. He stressed that charter schools are created to teach children. He suggested that the only difficulty a charter school child would have if they had to return to a regular classroom, would be that they could be beyond the level of other students in their class. Co-Chair Mulder noted that statutes do not contain a clear definition of the mission or objective of charter schools. He felt that charter schools have labored under the effort to be everything to everybody. He spoke in support of creating a concise mission statement for charter schools in order to answer many of the questions being asked and provide the answers that would help more clearly identify hindrances to success. Mr. Miller disagreed that current charter schools have tried to be all things to all people. He noted that each charter school has a different emphasis. He pointed out that the mission statement could be found in the charter school's application. Co-Chair Mulder noted that everyone did not want charter schools to succeed. He expressed support for more educational opportunities or choice. CAROL COMEAU, ASSISTANT SUPERINTENDENT FOR INSTRUCTION, ANCHORAGE SCHOOL DISTRICT, ANCHORAGE testified that the Anchorage School District supports section 1, which would allow more charter schools. She noted that section 4 is the most problematic to school districts. School districts are concerned about the implementation of section 4. She agreed with the elimination of the sunset clause. The space issue is a major concern in Anchorage. She supported extending the contract length to 10 years. She added that the biggest challenge is meeting occupancy codes for facilities in the city of Anchorage Representative J. Davies asked if language in subsection (f) would affect section 4. He asked if the charter schools would receive more than their basic need. JANET STOKES, CHIEF FINANCIAL OFFICER, ANCHORAGE SCHOOL DISTRICT, ANCHORAGE responded to questions by Representative J. Davies. She interpreted the reference to AS 14.17.410(c) as additional local revenues above the 4-mil contribution. Anchorage has implemented activity fees in lieu of reducing programs. According to this section, charter schools electing not to participate in these programs would receive funds that would have gone to the program. She felt that this would be problematic. CYNTHIA HENRY, PRESIDENT, FAIRBANKS NORTH STAR BOROUGH SCHOOL DISTRICT, FAIRBANKS testified via teleconference. She stated that HB 191 would be problematic, especially in regards to section 4. She expressed concern that section 4 could result in an adversarial relationship between the school district and its charter schools. The district's open policy includes charter schools. She cautioned that the provision to account for services could create a bureaucratic nightmare and increase costs and personnel. Ms. Henry stated that the Fairbanks North Star School District does not oppose the elimination of the sunset date. Fairbanks received five charter school charters. Only two have been awarded. Co-Chair Therriault noted that it would not be difficult to account for snow removal or rent. Ms. Henry agreed, but emphasized that other services would be more difficult. MIKE FISHER, ASSISTANT SUPERINTENDENT, BUSINESS AND FINANCE, FAIRBANKS NORTH STAR BOROUGH SCHOOL DISTRICT acknowledged that the school district has mechanisms in place to account for services such as snow removal and rent. They do not currently charge the indirect rate to their charter schools. It would be difficult to generate a true intergovernmental cost allocation. Representative J. Davies referred to subsection (f). Mr. Fisher explained that their local contribution is approximately $30 million dollars, $18 million dollars of this comes from the required contribution. The additional $12 million dollars would be prorated to the charter schools based on their adjusted Average Daily Membership (ADM). Ms. Henry felt that the School District's current contribution would meet this level of contribution but reiterated that accounting would be problematic. Co-Chair Therriault acknowledged that the Fairbanks North Star Borough School District is probably providing assistance beyond the required contribution level, but emphasized that the intent of the legislation is to address districts that are not providing a fair allocation DR. NICK STAYROOK, FAIRBANKS NORTH STAR BOROUGH SCHOOL DISTRICT, FAIRBANKS testified via teleconference. He echoed comments by Ms. Henry and Mr. Fisher. He stated that he did not know if allocation of the addition local contribution would be considered as part of the basic need for charter schools. He noted that additional sources of funds are provided to charter schools in Fairbanks. He referred to a proposed amendment regarding the use of public facilities by charter schools (copy on file.) He pointed out that AS 14.03.255(d) states that the chief school administrator must determine that the facility meets requirements for health and safety applicable to other public schools in the district. Representative J. Davies asked if the school district would retain liability if a charter school did not complete their contract. Mr. Stayrook explained that the charter schools operate on a 5-year term, however their contract is negotiated annually. He anticipated that existing charter schools would receive a new 5-year contract at the end of their current term. He did not think that an increase in the number of charter schools would have a negative impact. LARRY SEMMENS, ACADEMIC POLICY COMMITTEE, AURORA BORELIS CHARTER SCHOOL, KENAI testified via teleconference in support of HB 191. He pointed out that basic need is the minimum amount that a school district provides. He stressed that their charter school could not function at the level of basic need. He noted that their school has 90 students. There are openings for 20 students in the next year with a waiting list of 109 students. He did not want to see charter schools receive less than they are currently receiving. Representative G. Davis questioned if their charter school is successful economically. Mr. Semmens noted that they have had difficulty procuring a facility to house their charter school. The school started in a church and paid $75 thousand dollars a year in rent. They are now in a vacant elementary school, which has been provided by the city and school district without a fee. He noted that their teachers are new to the district and at the lower end of the salary scale. When teachers move to upper levels, funding will be more difficult. Representative J. Davies asked if they have had problems with the issues that the provisions in section 4 are intended to address. Mr. Semmens explained that the charter school has been charged for services that they did not receive, but that they had received sufficient funding. He did not want to quibble over every item. SEAN STRAUSS, PARENT, JUNEAU testified in support of HB 105. He noted that there is only one remaining charter available in Juneau. There are two applications for charter schools pending in Juneau, a Montessori charter school and a Native language charter school. He spoke in support of section 1 with no geographic restrictions. Vice Chair Bunde noted without geographical restrictions that the majority of schools could go to Anchorage. He questioned if there should be geographic considerations. Mr. Strauss emphasized that the increase in schools would allow schools to be considered based on their merit. EDDY JEANS, SCHOOL FINANCE MANAGER, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT provided information regarding the legislation. He discussed the additional local contribution contained on page 2, line 22. This section refers to the additional local contributions that municipalities are allowed to make to school districts under the foundation program. This is limited to two revenue sources, the value of in kind services performed by the city or borough and the tax appropriation. Mr. Jeans referred to page 2, line 31: "A local school board shall provide an approved charter school with an annual budget. The budget shall be not less than the basic need for the charter school as determined under AS 14.17.410(b)(1)(A) and (B) and must reflect the itemization and per student value required under (e) of this section". He noted that there is a proposed amendment to delete the reference to (A) and (B). These are two of the four components that make up basic need. He noted that schools are given and adjusted ADM. This is multiplied by the district cost factor and then multiplied by the special needs factor of 1.20. There are other adjustments for intensive student services and correspondence students. This results in the school's adjusted ADM. This is multiplied by the base student allocation of 3,940 to calculate basic need. Basic need is divided into three components: state funding, federal impact aid dollars and the four mil local share. The basic need can be easily calculated for all charter schools. The legislation lists the type of services that can be provided by the school district. School district and the charter school can negotiate for special needs and intensive services. Co-Chair Therriault clarified that charter schools would not automatically receive the 20 percent for special needs. Mr. Jeans noted that some charter schools are retaining the 20 percent and providing special needs services and some are having their needs provided by the school district. Co-Chair Therriault expressed concern that schools that do not have special needs students do not receive part of this funding. Mr. Jeans pointed out that the calculation for special needs is an adjustment to all the students across the district. The charter school students will generate 20 percent for special needs regardless of whether they special needs students or get to keep the money. Co-Chair Mulder concluded that the calculation for basic needs is simple to make. Mr. Jeans agreed. Co-Chair Mulder asked the Department of Education and Early Development's role in relationship to charter schools. (Tape Change, HFC 00 - 21, Side 2) Mr. Jeans agreed that the legislation would diminish the department's involvement in financial mediation. He emphasized that the department's obligation in the application process would remain. He thought that the department would remain involved in some of the negotiations for itemized services. Co-Chair Mulder questioned if the department viewed its role as an arbiter. Mr. Jeans responded that the department would be a sounding board, not necessarily an arbiter. Co-Chair Mulder questioned who would make the final decision. Mr. Jeans concluded that the final decision would have to be negotiated between the charter school and the school board. In response to a question by Co-Chair Therriault, Mr. Jeans clarified that impasses would not be "kicked back" to the department. He added that the charter school community relies on the department to look at some of the issues that they do not understand. The department provides advice and direction. Representative J. Davies observed that the Board of Education is involved by statute. Co-Chair Mulder questioned if the Board "rubber stamps" decisions made by local school districts. Mr. Jeans did not know if the Board had ever turned down an application approved by a local school district. Co-Chair Therriault recalled that, during debate on the charter legislation, the involvement of the state Board of Education gave comfort to concerns that things might not work out at the local level. Representative J. Davies recounted that the charter school legislation was a pilot program that allowed federal funds for charter schools and that those funds are about to run out. Mr. Jeans agreed that the charter school legislation was a pilot program. He noted that the legislation would institutionalize the program. There is a fiscal note for a position to administer the program. He reiterated that the department assists charter schools in the application process. Representative Dyson observed that many states have charter school boards. He noted that there are people in the public school movement that do not like charter schools, but are willing to support them as an alternative to vouchers. Representative Grussendorf referred to page 3, line 24, allocation of local revenues. Mr. Jeans explained that the local revenues cited are revenues made available by municipalities under AS 14.17. There is a cap on the amount municipalities can contribute. The legislation would take the amount that is contributed above the required 4 mil local effort and divide this by the total student population and multiply this per student figure by the amount of students in the charter school. This is the additional revenue that would have to be appropriated to charter schools above local need. Representative Grussendorf pointed out that some school districts are already providing these funds. Mr. Jeans noted that some districts provide additional local revenues and others do not. Representative Grussendorf noted that the legislature's desire to support charter schools has put (financial) pressures on school districts. Representative Austerman questioned if the additional local contribution would be tied to a specific need. Mr. Jeans explained that under the funding is discretionary under the current structure. The school board adopts a budget with a requested local contribution. Then assemblies make their appropriation to the overall operation. The funding is discretionary. BARBARA THOMPSON, DEPUTY DIRECTOR, DIVISION OF TEACHERS AND LEARNING SUPPORT, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT provided information regarding the fiscal note. She noted that the state of Alaska has received federal funding to support charter schools for the past four years. These funds are ceasing. Co-Chair Therriault noted that the fiscal note requests $100 thousand dollars for Department of Education and Early Development personnel. She explained that the legislation would increase charter schools around the state. The department anticipates an increase in workload. The department currently has a part-time person that is paid with 5 percent of the federal funds. In response to a question by Representative Williams, Ms. Thompson acknowledged that the department is requesting funds for personal services, supplies, travel and contractual costs. She emphasized that it is a state program. She stressed that staff is needed to keep the program running and help schools to get established. Representative J. Davies asked if the disappearance of federal funds would increase the demand on the department to help prepare grants and implement programs. Ms. Thompson indicated that the workload would shift, but did not anticipate that it would lessen. The department would not put out requests for grant proposals since they would not have money to put out a grant program. However, the workload in other areas could increase with additional charter schools if the cap were eliminated. Co-Chair Therriault observed that the fiscal note requests one position, but that additional percentages of FTE (full time equivalent) positions are included. Ms. Thompson explained that the department would be losing some federal grants. This will free one grant administrator to take on the work of this program. She explained that only one additional position is needed due to the ability to shift personnel. In response to a question by Representative Williams, Ms. Thompson explained that charter schools are reviewed as a real option for students' needs to be met. Representative Dyson anticipated that there is interest in charter schools that would be specific to professions or language. He anticipated that poor exit exam results would increase demand for alternatives. Representative Austerman questioned if additional charter schools would result in an increase in the cost of education in Alaska. Mr. Jeans responded that there is not a fiscal note for the foundation program. The anticipation is that charter schools would draw off of the existing student population. There would only be a shift from the formula. Representative Austerman questioned if it would weaken the existing system. Mr. Jeans emphasized that it would provide additional education opportunities for the general public. New programs would be incorporated within the existing system. Co-Chair Therriault observed that it would challenge the existing system to provide a new level of excellence. Representative Dyson emphasized that students from private schools or home schooling may opt into the system. HB 191 was heard and HELD in Committee for further consideration.