CS FOR SENATE BILL NO. 182(EDC) "An Act amending the amount of state funding provided to school districts for pupil transportation." Vice-chair Fairclough MOVED to ADOPT Work Draft HCS CSSB182 (FIN) 27-LS1283\O, (4/13/12, Mischel). Co-Chair Stoltze OBJECTED for purpose of discussion. PETER ECKLUND, STAFF, REPRESENTATIVE BILL THOMAS, explained the changes in the current version of the legislation. He noted that several new provisions were added. The bill maintained the supplemental payment of slightly over $8 million to cover increased costs for pupil transportation. He remarked that the supplemental payment for the Kenai Borough was increased by $1.2 million in FY 13. He reported that the Senate version contained a provision that made the FY 2013 pupil transportation expenditure adjusted for inflation according to the Consumer Price Index (CPI) the base amount to determine future funding. The new CS uses the FY 13 expenditure as the base and adds 1.5 percent for FY 2014 and FY 2015 and does not provide the inflation factor in FY 2016; intended as a measure to negotiate for cost containment in future contract negotiations. He elaborated that most school districts will renegotiate its contracts in 2016. The CS retained the provision that required the school districts to adopt standardized regulations for safe and cost efficient pupil transportation which included standardized contract conditions. Mr. Ecklund furthered that SB 199 (SB 199-Vocational Education Funding Factor) was rolled into the legislation. The legislation expanded vocational education funding for the middle school level; grades 7 through 12. The CS increased vocational funding by 50 percent. In addition a "mill rate disparity" on the full value of the required local contribution was remedied. Some city or borough school districts were contributing a mill rate of 2.7 and others were paying a rate of 3.7. Over time $530 million of the local contribution shifted from the local communities to the state. The legislation proposed to equalize the mill rate to 2.65 percent on the full value [of the taxable real and personal property in the district]. The provision repealed a section of law that authorized the calculation of only 50 percent of the mill rate increase since 1999. Municipalities would receive an approximately $21 million increase in state aid under the proposed changes. The municipalities have the option of using the additional money to fully fund education to the "local education cap." He added that current law required a new city or borough school district to phase in the mill rate calculation at zero, two, and four percent consecutively over 3 years. The provision in the committee substitute (CS) reduced the phase-in rates to zero, one, and two percent to provide relief from the immediate impact of the full local contribution. Mr. Ecklund expounded that the CS incorporated HB 49 [HB 49-Early Childhood Ed: Parents As Teachers.] The legislation proposed the establishment of a Parent As Teachers Program. The three year pilot program was designed to boost a child's readiness for school. The sunset date was adjusted to 2015 to allow for the full three years of the pilot program. The original bill required that the Department of Education and Early Development (DEED) compare performance of participants and non-participants in the program. The CS required a report on the "efficiency and effectiveness measures that demonstrated the results of the program relating to child school readiness." He noted that the cost of the program reflected on the fiscal note was $3.9 million. Co-Chair Stoltze offered that $25 million was deducted from "local discretionary (individual districts) funding" in the capital budget and added to education spending. 10:34:42 AM Co-Chair Stoltze WITHDREW his OBJECTION. There being NO OBJECTION the committee substitute was adopted. Representative Gara applauded the compromises in the legislation. He understood that the CS corrected the provision in law that allowed a community to only contribute 50 percent of its mill rate increases as its local contribution for school funding. When property values increased the local contribution only increased half as much in relative value. He asked what the impact of the change was on future state and local contributions. Mr. Ecklund agreed that the CS repealed the law that allowed only 50 percent of the mill rate increase calculated into the local contribution as property values grow. The change to a standard contribution for all municipalities equalized the disparity in local contributions. He referred to a new DEED fiscal note. He cited Page 3, which showed the increased state aid for each district that totaled $21,296,396. He exemplified that Anchorage would receive $8,159,847 more in state aid, which signified a savings to the municipality. The city could contribute the savings to fund education to the allowable local contribution maximum limit. Anchorage currently contributed a 2.9 mill rate at full value. The legislation would reduce the contribution to a rate of 2.65. In the future, if assessed values continue to grow that outcome could change. Representative Gara understood that over time the change might require some localities to pay more. He asked if the $21 million increase in state aid for FY 13 was in addition to the $51 million increase in education funding. Mr. Ecklund replied that the $21 million was additional funding. He reported that the CS contained an additional approximately $50 million in increased state aid to school districts in FY 2012 and FY 2013. 10:39:35 AM Representative Neuman relayed that the Matanuska-Susitna Borough school population was growing at a rate of 432 pupils per year. The growth represented a new school every year. The borough cannot keep up with school construction at the present assessment of property values. The borough supported taxes in order to build new schools. He asked how the change to the local contribution could benefit the borough. Mr. Ecklund replied that the legislation was intended to balance the different components to educational spending. He noted that the borough benefited the most with the transportation funding. The Matanuska-Susitna Borough was currently paying a mill rate of 2.7. He commented that the change was due to a "policy call" by the legislature. The choice was to either equalize local contributions or continue with disparity on the full value. Representative Neuman voiced that the additional transportation funding was appropriated from the capital budget and could not be counted on in the future. The mill rate changes were embedded in the foundation formula for education. Mr. Ecklund clarified that the pupil transportation was a "formula change" and was permanent until contracts were renegotiated in 4 or 5 years. Co-Chair Stoltze OPENED public testimony. Co-Chair Stoltze CLOSED public testimony. 10:43:06 AM Co-Chair Stoltze acknowledged Senator Meyer and Senator Thomas who laid the ground work for the legislation. Vice-chair Fairclough highlighted the fiscal notes. She referred to the new fiscal note affecting fund transfers (4/10/2012) into the Public Education Fund (PEF). She pointed out that the FY 2013 appropriation requested column should read FY 2012. The appropriation in FY 2012 was $86,811 million. For the out-years $41,031.3 million was projected in FY 2015 through FY 2018. She moved to the new zero (DEED) fiscal note (4/13/2012) allocated to Pupil Transportation. She cited the new DEED fiscal note (4/13/2012) allocated to School Finance and Facilities in the amount of $95.3 thousand from FY 2013 to FY 2018 for a full time School Finance Specialist II position. She turned to the new zero DEED fiscal note (4/13/2012) allocated to the Foundation Program. She noted the new DEED fiscal note (4/13/2012) allocated to Early Learning Coordination in the amount of $3,902.5 million in FY 2013 through FY 15. Co-Chair Thomas MOVED to report HCS CSSB 182(FIN) out of committee with individual recommendations and the accompanying fiscal notes. HCS CSSB 182(FIN) was REPORTED out of committee with a "do pass" recommendation and with three new fiscal impact notes from Department of Education and Early Development and two new zero notes from Department of Education and Early Development. 10:47:08 AM AT EASE 10:49:45 AM RECONVENED