CS FOR SENATE BILL NO. 105(HES) "An Act determining the facilities constituting a school for purposes of public school funding; and providing for an effective date." Senator Taylor stated that this legislation corrects problems with SB 36, legislation passed in a previous session changing the foundation funding formula for public schools. He pointed out that Petersburg barely qualified for the enrollment requirement set out in SB 36. He continued that in the community of Wrangell there were three funding units for elementary, middle and high schools. He noted that because of this, Wrangell would not receive any significant funding, but rather were required to institute special taxation programs to make up for the shortfall. He added that Petersburg or Wrangell have never taken advantage of the previous school basic funding formula. He explained the characteristics of a new committee substitute not presently before the committee, which would provide for a decline on the present funding mechanism at 75 percent, then to 50 percent, and finally to 25 percent. He asserted that these funding percents were created for the purposes of bringing Petersburg and Wrangell to current levels of necessary allotted monies. Senator Phillips affirmed that this legislation would only affect three communities, these being Petersburg, Wrangell and Delta Greely. He wondered how much each community paid for their schools. Senator Taylor responded that these communities pay up to the cap and above, some of which; is paid out of the city coffers. He continued that Wrangell increased its real property taxes by 20 percent, all of which was spent on education. A discussion ensued between Senator Taylor and Senator Phillips regarding the non-tax paying status of Delta Greely. Senator Wilken gave a historical overview of school funding for Petersburg and Wrangell, as well as Delta Greely as illustration of the inequities between tax based and non- tax based communities, which progressed into a general discussion about how school expenses are funded statewide per established formulas. Senator Taylor, Senator Phillips, Senator Green and Senator Leman participated in this discussion. Senator Green referred to discussions from last session regarding the Department of Education and Early Development's hesitancy to amend SB 36, until the overall effects of this legislation could be weighed on a statewide basis. Mr. Jeans responded that this is still the department's position. He noted that the department does recognize the effects to a school system that falls below the established formula number. He noted that when a community has more than 750 students in their system, this community has the benefit of counting three schools, if three schools presently exist. He continued that with a drop of students, this community can only count on funding for two schools, which can be a substantial cut. He remarked that a three-year transition formula as proposed in this current legislation might be inappropriate, but rather a one-year transition might be in order. Senator Green asked if the department could foresee any other community falling into this similar situation. Mr. Jeans responded that the two communities closest to this cut-off figure are Petersburg and Delta Junction. He then responded to various questions about a proposed study regarding cost differentials, which this study is slated to be completed next year. Senator Wilken referred to the efforts of two Accountants, who are presently trying to align the state's chart of accounts. Mr. Jeans responded that in addition to SB 36, the legislature appropriated additional resources for the hire of two internal auditors who are compiling comparable data between school districts. He added that different school districts were accounting for certain types of expenditures inconsistently with other school districts. He summarized that these efforts were an attempt to make these accounts more uniform. DAN BECK, Greely School Board testified via teleconference from Greely. He stated that his community was in the process of creating a borough. He noted that Greely would need help with funding their schools once this transition takes place. He outlined the funds that Greely has lost in this past year because their student enrollment fell below the cut-off formula. He stressed that unless Greely can get some relief, the community will have to lay off 19 teachers and one administrator. He spoke to additional shortfalls. Tape: SFC - 00 #45, Side B, 9:49 AM Mr. Beck responded to a question posed by Senator Leman regarding the district's ADM (Average Daily Membership) number at 1022 students, putting them over the threshold. Mr. Beck noted this number was closer to 891 students. Senator Phillips asked what the timeline was related to Greely becoming a borough. Mr. Beck responded that the charter would be submitted within six weeks. ART GRISWOLD, Borough Incorporation Committee testified via teleconference from Greely reiterated this six-week estimate. He continued that after the necessary signatures were collected, it would be up to the Boundary Commission to set a date for a hearing, and it would probably be within 90 to 120 days after this hearing that a final vote would take place. KAREN LIGON, Nome Public Schools, testified via teleconference from Nome. She stated that in Nome they absorb the Nome Youth Facility, which is a youth correctional institution. She added that educational services are provided here for a capacity of 6 to 12 students. She spoke about an alternative high school with a student population that fluctuates from 25 to 35 students there as well. She stressed that it is hard to provide adequate services to these small schools when it is a requirement to count them as part of a larger school, which has the highest ADM. DEBBIE COOK, Chinook Charter School testified via teleconference from Fairbanks. She stated the school's concern with SB 105 dealt specifically with section 1.3, which states: (3) in a community with an ADM of greater than 450 [750], each facility that is administered as a separate school shall be counted as one school, except that each alternative school with an ADM of less than 200 shall be counted as a part of the school in the district with the highest ADM. She stated that this section continues to treat charter schools with less than 200 students for funding purposes, as if the students are enrolled in the school with the largest ADM in the district. She asserted that this creates an inequity with smaller schools. She gave various examples of how the Chinook Charter School lacks many of the programs of these larger schools and along with the established funding formulas, this charter school has a harder time meeting their costs. SCOTT WHEAT testified via teleconference from Homer and stated that he supports this legislation, especially from a rural perspective. RICK HARNESS testified via teleconference from Homer to support this bill. He spoke to the possibility of cutting staff in Homer schools because of funding shortfalls, something, which affects the whole community. He also stressed that funding charter schools takes away monies that could be used in the public school system. PATRICK HICKEY, Kenai School District, testified via teleconference from Kenai. He addressed the issue of how schools are categorized by this legislation. He suggested that having a charter school with 26 students, while funding it along with a community of 600 students in a larger high school creates an inequitable situation. He concluded that charter schools should be treated like any other. Senator Green responded to Co-Chair Torgerson's concern that the testimony was turning into a charter school debate. She pointed out that this legislation in earlier versions did make reference to charter schools and inferred that some of the testifiers were referring to this older version. ELIZABETH BACOM, Petersburg School Board testified via teleconference from Petersburg. She highlighted the negative fiscal impacts created by declining enrollment, while using the two-school formula as versus the three- school calculations as was testified to previously. She listed all those programs that the district stands to loose, as a result and those that they have already lost. She also outlined how Petersburg has had to shore up their resources to save existing funding. MIKA MACH, Chinook Charter School, testified via teleconference from Fairbanks regarding the inclusion of charter schools into this legislation. She requested that a benchmark be included in section 3 to cover the Chinook Charter School. CARL ROSE, Executive Director, Association of Alaska School Boards stated that the association supports this legislation, although they are concerned that a present state funding policy exists under a foundation formula. He noted the benchmark change from 750 to 450 ADM, his main point being that whatever the benchmark, it needs to be consistent from one school district to the next. Senator Phillips asked Mr. Rose to address the inequity created by two tax paying jurisdictions that are presently requesting relief, along with another community, Delta Greely, a non-paying tax community. Mr. Rose responded that he does agree that an inequity exists, but suggested that this issue be addressed through another avenue. A lengthy discussion ensued between Mr. Rose, Art Griswold and Senator Phillips regarding this issue. Senator Wilken made a motion to adopt SB 105, 1-LS06AA\T as the committee substitute. Hearing no objection, it was so moved. Co-Chair Torgerson ordered the bill HELD in committee.