The Senate Community & Regional Affairs Committee was called to order by Chairman Randy Phillips at 9:10 a.m. He brought SB 62 (PUBLIC SCHOOL FOUNDATION PROGRAM) before the committee as the only order of business. Number 020 SENATOR LEMAN moved that CSSB 62(CRA) (version o dated 3/28/94) be adopted. SENATOR TAYLOR objected for the purpose of asking questions. Number 045 SENATOR TAYLOR asked if an adjustment had been made in the Area Cost Differential or the manner in which Area Cost Differential is calculated within the formula. DUANE GUILEY responded that the committee substitute does not require any change to the current Area Cost Differential. Number 070 SENATOR RANDY PHILLIPS asked Shirley Armstrong to outline the differences in the new committee substitute. SHIRLEY ARMSTRONG, Committee Aide, Senate Community and Regional Affairs Committee, outlined the following three changes contained in CSSB 62(CRA): (1) On page 2, line 2, it requires the Department of Education to define funding communities to include no less than 16 students in average daily membership. That was changed from 25 students in the first committee substitute. (2) On page 3, the repealer on the holdharmless that repealed the current law has been removed from the new committee substitute, thus retaining the current holdharmless provision in statute. (3) The effective date of the legislation was changed from July 1, 1993 to July 1, 1994. Number 097 DUANE GUILEY explained that current statute provides for a three- year holdharmless that is phased in at a 75 percent, 50 percent and 25 percent and then zero supplement to a district. By removing Section 8 it reverts back to the existing statutory holdharmless. Number 136 SENATOR TAYLOR removed his objection to adopting CSSB 62(CRA). Hearing no further objection, the Chairman stated the motion carried. Number 147 SENATOR TAYLOR offered and moved the following Amendment No. 1: Page 1, line 5: After "shall" delete"include at least" and insert "be" Page 1, line 6: Delete "the lesser of" Page 1, line 7: Delete "[1]" Page 1, line 10: Delete "; or" and insert a period (.) Page 1, lines 11 & 12: Delete paragraph (2) in its entirety Senator Taylor explained that his amendment would remove the provision that provides a local community would only be required to pay up to 4 mills or 50 percent, whichever is least. Mr.Guiley added that the proposed amendment would affect currently three districts in the state: North Slope, Valdez and Unalaska. He suggested leaving paragraph (2) in for purposes of accomplishing the task and changing that number to 100 percent so that a district would be required to submit 4 mills or 100 percent of basic need, or consider some way of recapturing that extra contribution over and above 100 percent of basic need for redistribution throughout the state. Number 215 SENATOR RANDY PHILLIPS called for a hand vote on Amendment No. 1. Senator Taylor and Leman voted "Yea" and Senators Phillips voted "Nay." Senator Leman changed his vote to "Nay." The Chairman stated Amendment No. 1 failed. Number 227 SENATOR TAYLOR offered and moved the following Amendment No. 2: Reinsert Section 8 to read as follows: "* Sec. 8. AS 14.17.031(b) is repealed." Amend the percentage in the holdharmless provision from 10 percent to 5 five percent. DUANE GUILEY explained that Senator Taylor's amendment would require adding a new section to the committee substitute that would adjust the existing statute, AS 14.17.031(b). The existing statute requires the holdharmless to be effective when there is a 10 percent drop in K-12 units. It is a phasing out of the loss over a period of four years, thereby allowing an opportunity for a district to adjust their program down to their new student enrollment number or the new revenue number. SENATOR TAYLOR added that this would take care of the problem of the projected enrollment drop by the Sitka school district. Also, Sitka is the only district in the state that would impacted by the change. Number 265 SENATOR RANDY PHILLIPS called for a hand vote on Amendment No. 2. Senators Taylor, Leman and Phillips voted "Yea." The Chairman stated Amendment No. 2 was adopted. Number 275 SENATOR TAYLOR offered and moved the following Amendment No. 3: Reinsert the Area Cost Differential language that was deleted from the original bill (Section 3 of SB 62). DUANE GUILEY explained that if the state were to undertake a study similar to the McDowell study that was done in 1983, current estimates are that an update to that study could cost as much as $1 million if the same firm and same type of process is used. The 1988 update cost the state approximately $250,000. He said the section in the original SB 62 provides an opportunity for the department to develop a new Alaska School Price Index for the purpose of replacing the current Area Cost Differential. It would be developed through regulation and it does not mandate another study, so the opportunity would exist for the department to review the 1988 McDowell update and simply suggest that it be adopted as the new Alaska School Price Index. SENATOR RANDY PHILLIPS voiced his concern that an update could cost up to $1 million. SENATOR TAYLOR responded that could happen only if they opt to go out and are authorized by the Finance Committee to undertake a new study. The department can do it by regulation internally. Number 300 SHIRLEY ARMSTRONG pointed out that Section 1 of the original SB 62 should also be added back in as part of the amendment as the two sections work together. SENATOR TAYLOR amended Amendment No. 3 to include Section 1 of the original SB 62. SENATOR RANDY PHILLIPS called for a hand vote on Amendment No. 3. Senators Leman, Taylor and Phillips voted "Yea." The Chairman stated Amendment No. 3 was adopted. Number 337 SENATOR TAYLOR moved Senator Adams' Amendment No. 1: Delete existing Section 1 and replace with: "*Section 1. AS 14.17.025(b)(2) is amended to read: 24 {23} percent of the district's basic need for the fiscal year under AS 14.17.021(b), as adjusted AS 14.17.225(b)." MARLA BERG, staff to Senator Adams, explained that instead of changing the local contribution requirement it would change the allowable local effort from 23 percent to 24 percent. Senator Adams believes that this would address a problem for some of the school districts in the state without making drastic changes to the existing formula. DUANE GUILEY pointed out that the amendment would increase local capacity throughout the state by approximately $15 million over and above existing capacity. Number 360 SENATOR TAYLOR stated he has consistently opposed an increase in the cap until there is a rewrite of the formula because he believes it is still inequitable, so he will continue to oppose an increase. Number 398 SENATOR RANDY PHILLIPS called for a hand vote on the adoption of Senator Adams' Amendment No. 1. Senators Phillips, Leman and Taylor all voted "Nay." The Chairman stated the amendment failed. Number 402 SENATOR RANDY PHILLIPS brought the following Senator Adams' Amendment No. 2 before the committee: Page 2, line 2: Delete "16" and replace with "8" MARLA BERG explained that Senator Adams is recommending reducing the number of the average daily membership of students from 16 to 8. As drafted, the committee substitute would save approximately $5 million, but would have a very negative impact on many school districts. The amendment would save the state $1.1 million and would reduce the impacted school districts to seven. SENATOR RANDY PHILLIPS pointed out that the average daily membership was 25 and was reduced down to 16 in the committee substitute. SENATOR RANDY PHILLIPS called for a hand vote on Senator Adams' Amendment No. 2. Senators Phillips, Leman and Taylor all voted "Nay." The Chairman stated the amendment failed. Number 425 SENATOR TAYLOR offered and moved the following Amendment No. 4: Page 2, line: Delete "16" and replace with "10" Senator Taylor explained that his amendment would give the department up front what they were going to do in the year 2000 anyway. SENATOR RANDY PHILLIPS called for a hand vote on Amendment No. 4. Senator Taylor voted "Yea" and Senators Leman and Phillips voted "Nay." The Chairman stated the amendment failed. Number 442 SENATOR RANDY PHILLIPS brought the following Amendment No. 3 by Senator Adams before the committee: Page 2: Delete Section 3 and renumber the following sections. MARLA BERG explained the amendment deletes Section 3 which relates to changing the devisor from 16 to 17. She added that Section 3 will cost the state $11.7 million with most of the benefit going to urban communities. SENATOR RANDY PHILLIPS called for a hand vote on Senator Adams' Amendment No. 3. Senators Leman, Taylor and Phillips voted "Nay." The Chairman stated the amendment failed. Number 452 SHIRLEY ARMSTRONG pointed out that in the original SB 62, Section 3 speaks to the Area Cost Differential, but on page 4, line 14, Section 6 speaks to the Alaska School Price Index. Mr. Guiley has suggested adding language which says that the department shall establish the Alaska School Price Index by regulation. SENATOR TAYLOR moved a conceptual amendment that the language within the legislation be amended to reflect that the department may accomplish both the survey and the method of calculating through regulations. Hearing no objection, the Chairman stated the conceptual amendment was adopted. Number 472 SENATOR TAYLOR moved that CSSB 62(CRA), as amended, be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. There being no further business to come before the committee, the meeting was adjourned at 9:45 a.m.