HOUSE BILL NO. 413 "An Act relating to the Alaska Challenge Youth Academy." 10:10:02 AM KATIE KOESTER, STAFF, REPRESENTATIVE PAUL SEATON, SPONSOR, explained that the bill would restructure the funding formula for the Alaska Challenge Youth Academy [also called the Alaska Military Youth Academy (AMYA)], a highly successful residential program for high-school drop-outs. Based on a national challenge model, the academy serves an important population that struggles in regular school. The academy has a 70 percent graduation rate; graduates receive a GED or diploma over an intensive 22-week course. The students are then followed for another year and are considered a success if at the end of the year they are in college or the military, attending vocational education school, or employed at least 30 hours per week; the success rate for the program is 93 percent. Ms. Koester explained that the education committee had been tasked with finding a more realistic formula for funding the academy. The current funding formula for AMYA is 7 times the base student allocation (BSA) for residential students, 0.6 times the BSA for non-residential students, less any federal funds received. For the current year, the numbers were 7 times $5,680, 0.6 times $5,680, minus $2.7 million in federal funding, or $5.8 million in general fund dollars. The committee was concerned that the increases in the BSA do not necessarily correlate with the increased costs at the academy. She explained that HB 413 would address the formula problem by taking a number ($11,990) and setting it in statute and multiplying that by the number of residential and non-residential students. The result would be approximately the same figure, $5.8 million. The number would be set in statute, and the academy would need to come to the legislature when they needed more funding. 10:13:18 AM Co-Chair Stoltze asked for more information. Ms. Koester replied that Mt. Edgecumbe is funded through the BSA for the instructional component and funded under the Department of Education and Early Development (DEED) budget for the residential component. She noted that the population served by the academy requires 100 percent supervision and is more high-needs than the Mt. Edgecumbe population, which is more high-achieving. Representative Gara asked whether the number was currently tied to the BSA. Ms. Koester answered yes. Representative Gara asked whether implementing the change would cause a lag in funding, since the BSA tends to increase each year. Ms. Koester responded that the legislature has shown commitment to the program and the academy would be able to get increases when needed. She acknowledged concerns that had been expressed that it may not increase at the same rate as 7 times the BSA. When Public Employee Retirement System (PERS) and Teachers Retirement System (TRS) costs were rolled into the BSA, the academy received larger funding. Ms. Koester noted that the Department of Military and Veterans Affairs (DMVA) was in favor of the legislation. Co-Chair Hawker stated strong support for the "innovative and successful" program. He noted discussion of the issue three years prior in the joint legislative educational task force; the issue of the correlation between the BSA and the needs of the academy was discussed and deferred to the education committee. Co-Chair Hawker stated concerns about putting a set number into statute when the number was inherently not durable. He pointed out an alternative to the formulaic programs fixed at 7 times the BSA was to disconnect the academy from a formula and have it come back each year and get into the operating budget based on actual annual needs. Co-Chair Hawker believed the fixed number was inflated, resulting in the mentioned windfall. He reiterated concerns. 10:18:47 AM Co-Chair Hawker questioned the number chosen and whether it accomplished the greatest good. Representative Austerman echoed support for the program for young people with problems. He asked whether there would be federal funds for the program in the future. Ms. Koester replied that there would still be federal funds. Representative Austerman thought the numbers would represent a substantial increase based on a flat figure plus the federal funds. Ms. Koester clarified how the figure was arrived at and explained that the general fund number would be the same. EDDY JEANS, DIRECTOR, SCHOOL FINANCES AND FACILITIES, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, explained that the department was supportive of the academy program and was simply a conduit for the program's revenue. His direction working with the education committee was to keep the state general funds at the same level as the FY 11 budget. He mentioned a $600,000 state general funds reduction in the department's FY 11 budget request because of a federal fund increase anticipated by the academy. Co-Chair Hawker reiterated concerns regarding the number. The federal funding fluctuates. 10:23:38 AM Representative Gara suggested pegging the annual student allocation to a multiple of the BSA. Ms. Koester responded that pegging the number to the BSA has not worked in the past because of the volatility of the number and because the needs addressed are different. The education committee wanted to get away from the formula. She noted that the number ($11,990) was the number that DMVA said they needed and could work with to deliver the same level of services. Co-Chair Stoltze hoped to talk to DMVA to check the numbers. Representative Kelly referred to concerns, including that a different multiplier (five times) had been looked at. He queried how the bill would address the perennial problem of the count at the academy. Mr. Jeans replied that tying the funding to the BSA did not work because of the increased TRS costs, which raised the BSA; the employees at the academy are PERS employees. The PERS increase was not as large, resulting in an unintended windfall to the youth academy. He stated that DEED was comfortable with moving away from tying to the BSA. He believed DMVA was also comfortable with the approach. In terms of the count, he had considered the number of students served through the program, both residential and non-residential and found that the number does not change much over multiple years. He had not looked at using multiple counts. He pointed out that annual operating costs would still be needed. HB 413 was HEARD and HELD in Committee for further consideration. 10:28:23 AM