HOUSE BILL NO. 171 An Act repealing the charter school grant program; and providing for an effective date. EDDY JEANS, MANGER, SCHOOL FINANCE AND FACILITIES SECTION, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, explained that the HB 171 would eliminate charter school grants. The State grant program implemented in FY2002, allocates money per ADM for each new charter school. The funding was intended to supplement the federal start up grants for charter schools. The Alaska Department of Education and Early Development is working closely with U.S. Department of Education to increase the level of start-up grants provided by the federal government therefore eliminating the need for the State supplemental grant program beginning in FY 2005. The State will allocate to new charter schools $150,000 a year for the first three years and $45,000 in the forth year, totaling $495,000 dollars start up funds over a four year period. The bill becomes effective July 1, 2004. The delayed implementation will allow the State to fulfill its commitment of start-up grants to the existing charter schools. Any new charter schools approved to operate in FY 2004 would be eligible for the federal grant funds. Co-Chair Harris asked if the State could anticipate more federal money. Mr. Jeans replied that was the "bottom line". Co-Chair Harris asked what would happen without the money. Mr. Jeans advised that with the one-year delay, if the federal funds do not come through, the Department would be back before the Legislature requesting reinstitution of the program. However, he added that every indication from the federal government indicates that the grant request will be looked upon favorably. Co-Chair Harris asked the benefits of a charter school to students and the State of Alaska. Mr. Jeans noted the amount of parental involvement in those schools. Charter schools are "grass root movements" and the parents are very involved in the classrooms. Charter schools have flexibility in their regulations; however, they are required to follow the same assessments as the regular public schools. Charter schools are public schools and have a contract with their local school district to operate the program. Co-Chair Harris inquired how much the State provides for each student in the charter school. Mr. Jeans explained that would vary depending on the program. Some of the charter school programs are correspondence programs and are funded at 80%. The main difference results from the student population of the charter school. If there are less than 150 students, the current foundation statute requires them to be added to the local school in that district. Therefore, their funding would be reduced. If they have over 150 students, they are allowed to go through the school size adjustment table just as any public school in the district. Co-Chair Harris asked if there were less than 150 students in the charter school, would they then get added to the regular school system and counted as such. Mr. Jeans explained that in statute is the "school size adjustment table", which adjusts for the student economy of scale. Within that section of statute, it stipulates that before a charter school is counted as a separate, independent school, there must be more than 150 students. If there were not that many students, it would be added to the largest school for funding purposes. Mr. Jeans reiterated that if there are over 150 students, they are then counted as their own separate school. Co-Chair Harris noted that the correspondence program is separate. Mr. Jeans acknowledged that was correct, pointing out that there are a couple charter schools funded as a correspondence program. Those programs will be funded at 80%. Vice-Chair Meyer inquired if there had been a statewide increase in the charter school programs. Mr. Jeans acknowledged that charter schools are on an increase statewide. That is directly related to legislation passed in 2001, which expanded the number from 30 to 60 charter schools in the State that can be operated by districts. He added that the State Board of Education just approved four new charter schools for this upcoming year; (1) in Mat-Su, (2) in Anchorage and (1) in Ketchikan. Vice-Chair Meyer asked how much additional money does a charter school receive. Mr. Jeans explained that there is not an easy answer and that it does depend on the size of the student population. The formula adjusts for economies of scale. If there is a small school of 150 students, there will be fixed costs associated, which would increase the amount. The formula adjusts for the economies of scales. Representative Croft pointed out that the State expects money for the FY05 budget, not this year. Mr. Jeans corrected Representative Croft pointing out that the State expects to receive the money this year. The effective date is FY04 because the Department is attempting to make the districts that are under the current State program "whole". That request is in the FY04 budget. Mr. Jeans added that once the federal grants are closed, they cannot be reopened. All new charter schools will be under the new federal allocation for charter school start up. Representative Croft asked about moving the State system and shifting it over to the federal area. He inquired why language should be repealed. Representative Croft voiced concern about the possibility that only part of the federal money might come through. Mr. Jeans explained that the Department does not intend to continue operating the State grant program. If the federal money does not come through, the Department will come back to the Legislature to determine if they want to reinstitute the State grant program. He noted that Senator Dyson shared that concern as well and put contingent language in the Senate version of the bill, which would address the repealler. Representative Croft maintained that if the State can fully utilize federal money now, the statute should remain on the books in case the federal funds are not guaranteed. He did not understand the need for the legislation. Mr. Jeans advised that the reason that the Department submitted the bill is that under the proposal before the federal government, the State will be able to allocated more money to the school districts through the federal program than they receive for both programs currently combined. If the State statute remains on the books, the State allows the entitlement program to remain on the books for districts and schools to continue to apply in the future for the State grant. That would send a clear message that the intention is to transition from the combined system to a single system. Co-Chair Harris asked why the fiscal note does not indicate federal revenues. Mr. Jeans understood that there would be sufficient federal authorization in the Teaching and Learning Division to absorb the grant request. Representative Foster MOVED to report HB 155 out of Committee with individual recommendations and with the accompanying fiscal. There being NO OBJECTION, it was so ordered. HB 171 was reported out of Committee with "individual" recommendations and with fiscal note #1 by the Department of Education & Early Development. TAPE HFC 03 - 55, Side B