SB 1-FOUNDATION FORMULA INCREASE    SENATOR WILKEN, prime sponsor, testified that this bill increases the base student allocation for educational funding from $3,940 to $4,085. The bill recognizes that, due to inflation, it costs more to operate a school today than it did when the base was set in 1998. The $145.00 increase is composed of two components. The first is a .9 percent increase that recognizes the inflation rate for FY01 in Anchorage, AK. The second shows the 13.9 percent inflationary loss of the per student dollar since FY88. He stated, "SB 1 takes the 13.9 and divides it by five and suggests a five- year plan to recoup the purchasing power of the student dollar that has been lost to inflation since 1988. Multiply $3,940 by 2.78 and you have SB 1." SENATOR WILKEN commented that increasingly, parents drop their children at school and expect to have an educated and well-mannered child at the end of the day. This costs money and resources. As performance standards become a reality, schools will be held more accountable for student learning. Additional classes, remedial opportunities and programs will make a difference in student performance but they will also have an impact on the financial resources of local schools. SENATOR WILKEN maintained that Alaska's children have the right to be taught by the very best teachers possible who are held to the same performance standards as their students. It isn't easy to recruit and retain quality teachers without adequate funding. This is particularly problematic for schools that are remote and isolated. Addressing the teacher shortage experienced in Alaska means offering salaries and benefits that are competitive in the professional workforce. K-12 education is a number one priority for Alaska and should be recognized as such in the state budget. SENATOR PHILLIPS asked for the total on the fiscal note for SB 1. SENATOR WILKEN said that if it is added to the 2002 requirement for the foundation formula it's approximately $30 million. It it's added to the spending for the 2001 foundation formula it's approximately $20 million. SENATOR PHILLIPS said that inflation isn't the only thing that affects the numbers. It's also based on a per capita or per student enrollment and that's why there is $10 million less in the coming fiscal year than the current fiscal year. SENATOR WILKEN said the reason that $10.5 million less is required this year has nothing to do with student enrollment. It has everything to do with an $8 million increase in the amount of money that organized Alaska is asked to pay for their education. This is assessed value. There's also about $2.5 million more in Public Law 874 money coming from the federal government. SENATOR PHILLIPS said there is no 10-year plan or vision for the State of Alaska and although he doesn't mind doing "something like this," he's disturbed by the lack of planning. It shows no proof of leadership. SENATOR WILKEN shares his frustration but contends that SB 1 offers a five-year plan for funding K-12 education using inflation as the guiding economic principle. This legislature cannot pass a 10-year plan binding the next four legislatures; it needs to work at melding all 60 legislators' plans on a biannual basis. It doesn't make sense to hold up educational plans for Alaska's children because we don't have a guiding master plan for the next 10 years. "This a component of the ten year plan, a five year plan and a two year plan. And the fact of the matter is, if we shirk our responsibility to fund K-12 today we surely will have a difficulty ten years from now with increased costs due to a non-educated populace. CHAIRMAN TORGERSON commented that the Senators were talking about different things. He doesn't see SB 1 as a five-year plan because it's continued funding for education. SENATOR PHILLIPS said that passing SB 1 would obligate future legislatures to fund it. He would like to develop a vision and then include SB 1 as a part but without a plan he doesn't see how it will fit. "It can't go by itself." SENATOR WILKEN said the bill recognizes the increased costs of education, teacher shortages and increased costs of accountability. "This is a one year plan with four more years of suggestions on how to buy back the power of the student dollar." SENATOR AUSTERMAN said it's an interesting debate that goes to the heart of the long-range plan issue. He asked where the $30 million is supposed to come from. SENATOR WILKEN said he is encouraging the legislature to fund the things that are important to him and to the people he represents. This is what the other 59 legislators are doing as well. If the money must come from the savings account then so be it; it's a good use for the savings account. When the savings are gone then another plan will be devised without taking money away from the working people of Alaska. It's obvious that the legislature is capable of solving this type of problem when there is need. The current issue is the priority placed on the education of Alaskan children, not where the money comes from. SENATOR AUSTERMAN agrees that this is a good program and it will eventually force the development of a long-range plan and make Alaskan citizens more responsible for education. The savings account cushion should be used before Alaskans must pay. Number 226 SENATOR KELLY reminded committee members that there are places in the budget where there is no discussion about more or less funding. The Health, Education, and Social Services (HESS) Budget has formulas attached to it that increase every year. Costs are increasing and the number of people signing up for services is also going up. This is what drives most of the budget discussion and yet it isn't ever questioned. It's a mistake to throw the contingency of a long-range plan in front of high priority needs for two reasons. "They're high priority needs. We're down here to do just a couple of things and one of them is to educate our children." Second, there is no such thing as a long-range plan. There is only a plan that is in front of each legislature and, two years at a time, legislators make decisions about what is before them at the time. It's not possible to devise a long-range fiscal plan that will solve future needs of the state. Decisions about need will be based on the situation at hand. SENATOR LINCOLN said she is pleased to hear discussion about a long range fiscal plan as the Democratic Minority has been urging. She's disturbed that the educational plan is being piecemealed when there should be a package. She asked what affect this legislation has on the supplemental funding floor and what the Governor's task force has recommended. She's in favor of increasing the base student allocation but she wants to know what else is needed to educate Alaskan students and get them through the qualifying exams. CHAIRMAN TORGERSON cautioned that he would allow latitude in responding to the question but that the Governor's Task Force wasn't before the committee. SENATOR WILKEN said SB 1 has no affect on the supplemental funding floor. He had no comment on the task force. TOM ANDERSON, Anchorage School Board member, testified in support of the concept. He pointed out that inflation has increased about 30 percent in the last ten years while state funding has increased just five percent. Property assessments have increased markedly, placing an increased burden on property owners in organized boroughs to pay for education. Assessments have increased over $8 million statewide. Ten years ago the state paid 73.7 percent of the budget while local taxes paid 23.7 percent. This year the state will pay 62.5 percent and local tax will pay 3.3 percent. MR. ANDERSON said teacher and principal salaries are no longer competitive causing positions to be open in the Anchorage system. At the same time, there is a significant increase in the need for special education and English as a second language (ESL) services. These are both expensive programs to implement and maintain. Finally, the Learning Opportunity Grant that was given has been helpful but isn't sufficient to enable them to meet the mandates of the Quality Schools Initiative. They are also struggling with changing curriculum to add standards based instructional materials. This involves increased time and teacher training. He noted the board supports making education a priority in any plan. ERNIE HALL, Educational Funding Task Force member and member of the State Board of Education, testified in support of SB 1. Senator Wilken covered most of the issues addressed by the funding task force and SB 1 is a vehicle to fund what they have recommended. CHAIRMAN TORGERSON asked what the recommendation was for this year's increase in the foundation formula. MR. HALL said it was approximately $34 million. CHAIRMAN TORGERSON said that the fiscal note for the legislation is $28.945 million and there is a list of what each district anticipates it will receive. He asked whether there were any questions for Mr. Jeans. SENATOR LINCOLN wondered where that money will come from to pay for the approximately $29 million over the next five years. EDDY JEANS, Finance Manager for the Department of Education and Early Development, said the department doesn't know where the money will come from at this time. On the fiscal note, it's been costed out as a general fund increase. SENATOR LINCOLN asked how the department came up with $28.975 million, while the task force figure is $34 million. MR. JEANS said the task force went through a laundry list of items that districts haven't received sufficient funding for over the last several years due to increased costs. When that list was costed out, it came to $34.6 million. [Tape malfunction.]   SENATOR AUSTERMAN moved SB 1 and fiscal note from committee with individual recommendations. CHAIRMAN TORGERSON said the bill will be heard in the Health Education and Social Services (HESS) committee but it is primarily a finance bill. He asked whether there were objections. SENATOR PHILLIPS objected because there is no vision or long term plan in place and he feels that is necessary before any large appropriations are made. He believes policy could be set this year to be followed by future legislatures. CHAIRMAN TORGERSON said planning is necessary but educational funding shouldn't be held up until a long-range plan is implemented. He supports moving the bill. SENATOR LINCOLN said she, too, is concerned about the lack of long range plans but education is a top priority for the state and those needs must be addressed regardless. It is her hope that the Senate HESS Committee will delve into the issue further. SENATOR KELLY asked when the minority was going to put out its plan. SENATOR LINCOLN said it has been discussed in open caucus every year. CHAIRMAN TORGERSON said there was objection to moving the bill and asked for a roll call. Senators Lincoln, Austerman, Kelly and Chairman Torgerson voted yea and Senator Phillips voted nay. The motion to move the bill passed four to one.