SENATE BILL NO. 202 "An Act relating to school transportation; relating to the base student allocation used in the formula for state funding of public education; and providing for an effective date." This was the third hearing for this bill in the Senate Finance Committee. Co-Chair Wilken stated this bill, "revises the method in which local school districts are reimbursed for pupil transportation costs. Under this bill, a pupil transportation grant program is established. In addition it raises the student dollar; an increase of $159, which is the conversion from LOGs [Learning Opportunity Grants] to student dollars." JENNIE HAMMOND, resident of Nikiski, testified via teleconference from Kenai in opposition to the bill. She expressed concerns that the Kenai Peninsula Borough School District would "lose" funds as a result of the transportation provisions. She spoke of academic programs and other operations that have received reduced funding in the past several years. She informed that transportation costs within the district vary by community and that funding should be assessed based on the cost of each route rather than on the number of students in a district. She requested this portion of the bill be "tabled" to garner additional input from affected districts. She furthered that State, federal and local parties should discuss the issue of who is responsible for the education of children. She stated that transportation and foundation formula funding are different issues that should be addressed independently. She indicated that as a parent, she is willing to contribute to the cost of her children's education. Senator Bunde asked if the Kenai school district has considered requesting that parents help pay the cost of transporting students. Ms. Hammond repeated that the matter should be discussed in school districts across Alaska. TODD SYVERSON, Assistant Superintendent, Kenai Peninsula Borough School District, testified via teleconference from Kenai to express concerns that the District has with this legislation. He stated this bill would reduce funding for pupil transportation and informed that the District must transport students 45 miles from Cooper Landing to Skyview High School, and from Moose Pass to Seward, regardless of the number of students along each route. He also told of the special education students that must be transported, often involving "singleton routes". He explained this involves picking up only one student and transporting them to the school equipped to meet their special requirements. He pointed out this legislation does not address the extra expense of transporting special education students. Mr. Syverson supported Co-Chair Wilken's proposed amendment to inflation proof the funding for pupil transportation funding. Mr. Syverson appreciated the proposed increase to the base student allocation, but stressed the amount of the increase is inadequate to address the needs of the District. He also noted that an area cost differential is not addressed in this bill. Co-Chair Wilken requested Mr. Jeans address comments on the differing costs of routes and special education students' routes. EDDY JEANS, Manager, School Finance and Facilities Section, Education Support Services, Department of Education and Early Development, testified the grant amount awarded to each school district would be determined by dividing the amount of the FY03 State appropriation by the total number of students enrolled in the district during FY 03. He stated that therefore, the costlier routes are already reimbursed in FY 03. He qualified this legislation does not provide increased funding in the event a district must add any special education routes or the development of a new subdivision. Co-Chair Wilken remarked this has been an important concept the Committee has considered. Amendment #1: This amendment inserts a new bill section on page 2, following line 7 to read as follows. Sec. 3. The uncodified law of the State of Alaska is amended by adding a new section to read: TRANSITION PROVISION FOR TRANSPORTATION FUNDING. In addition to funding provided for public transportation under AS 14.09.010, a school district that provides student transportation is, beginning July 1, 2004, and ending June 30, 2006, eligible to receive additional funding for operating the student transportation system in an amount equal to funding provided to the school district under AS 14.09.010 multiplied by a percentage equal to 50 percent of any percentage increase during the second preceding calendar year in the consumer price index for all urban consumers for the Anchorage metropolitan area, compiled by the Bureau of Labor Statistics, United States Department of Labor. The index for January 2002 is the reference base index. Co-Chair Wilken moved for adoption. Co-Chair Green objected. Co-Chair Wilken explained this amendment acknowledges that some school districts would prefer transitional funding to implement the changes. Therefore, he stated this amendment would increase the "per pupil grant" for FY 05 and FY 06 calculated from the consumer price index for Anchorage. Co-Chair Green asked impacts of this amendment. Co-Chair Wilken noted a draft fiscal note dated 5/14/03 for the Pupil Transportation budget request unit (BRU). Senator Hoffman understood the increase would be one half of two percent, or a one percent increase. Co-Chair Wilken clarified the actual amount of the increase could vary based on the consumer price index for Anchorage. Senator Hoffman asked why the increase would not be a full percent, rather than a partial percentage of the consumer price index. Co-Chair Wilken responded it is a "matter of money", and that increasing funding for this item could not exceed $1 million. Co-Chair Green opposed funding items based on any index, as it would become an "automatic escalator". Co-Chair Wilken shared the concern about automatic increases, but expressed that because this legislation would impose a significant change to the program, this amendment would lessen the fiscal impact to school districts. Senator Hoffman pointed out the increase would end after FY 06. Senator Hoffman moved to amend the amendment to increase the multiplier percentage of any percentage increase during the second preceding calendar year from 50 to 75 percent. Co-Chair Green and Co-Chair Wilken objected. A roll call was taken on the motion to amend the amendment. IN FAVOR: Senator Hoffman OPPOSED: Senator B. Stevens, Senator Bunde, Co-Chair Green and Co- Chair Wilken ABSENT: Senator Olson and Senator Taylor The motion FAILED (1-4-2) The amendment FAILED to be amended. Co-Chair Wilken affirmed his intent that this increase would not extend beyond FY 06 and that the funding is solely for transitional purposes. Senator B. Stevens asked how the increase would be distributed given that the calculation is different than the method used to determine the grant funding for each district. Mr. Jeans referenced the fiscal note, which details the dollar amount allocated per student to each district. He explained these amounts would be adjusted by one percent of the consumer price index for Anchorage. Senator Taylor clarified that school districts with declining enrollments would receive reduced funding and those funds would be reallocated to districts with increased enrollment. Mr. Jeans detailed the per student allocation would be calculated for each district utilizing the number of students and the amount appropriated in the base year of FY 03. He continued that the actual number of students enrolled in FY 05 would be multiplied by the per student allocation for that district to determine the grant amount for FY 05. He affirmed that districts with declined enrollment would receive fewer funds under this proposal. Senator Taylor expressed confusion, saying that if the consumer price index increases dramatically the actual appropriation would increase but not based on per capita. Co-Chair Wilken understood that districts with declining enrollment would receive less of a reduction under the provisions of this amendment. Mr. Jeans affirmed. Senator B. Stevens asked if the baseline for determining grant funding of FY 03 be utilized for calculating the grant amount for FY 06. Mr. Jeans explained the adjustment proposed in this amendment for FY 06 would be based on the FY 05 appropriation. He clarified the increase of FY 05 would "roll forward" and the adjustment would be "added to the prior year". Co-Chair Wilken furthered the increase would be cumulative. Senator Hoffman asked when and how often the consumer price index for Anchorage is determined. Mr. Jeans replied this information is published on the Department of Labor and Workforce Development website. Senator B. Stevens informed the index is calculated annually on July 1. Co-Chair Green removed her objection to the adoption to the amendment and Amendment #1 was ADOPTED. Amendment #2: This amendment deletes "to school transportation; relating" from the title of the bill. The amended bill title reads as follows. "An Act relating to the base student allocation used in the formula for state funding of public education; and providing for an effective date." This amendment also deletes Section 1 from the bill, amending AS 14.09.010. Transportation of pupils. Senator Hoffman moved for adoption. Co-Chair Wilken objected. Senator Hoffman stated this amendment would eliminate the grant formula proposed in this bill. Co-Chair Wilken understood this would "continue the status quo" of the current system. Senator Hoffman affirmed. A roll call was taken on the motion. IN FAVOR: Senator Taylor, Senator Hoffman and Senator Olson OPPOSED: Senator B. Stevens, Co-Chair Green and Co-Chair Wilken ABSENT: Senator Bunde The motion FAILED (3-3-1) The amendment FAILED to be adopted. Amendment #3: This amendment repeals the provisions of Section 1 of the bill, amending AS 14.09.010. Transportation of pupils., on July 1, 2006. Senator Hoffman moved for adoption. Co-Chair Wilken objected for an explanation. Senator Hoffman pointed out that the impacts of the grant proposal are unknown. He asserted the proposal is unfair to the school districts located in his election district. He remarked it would penalize the districts that have been frugal and kept costs down and reward the districts that have allowed costs to "run willy- nilly". Senator Hoffman stated this amendment would implement the program for two years, after which it could be evaluated with input from school districts and a fairer program could be created. Co-Chair Wilken maintained his objection. A roll call was taken on the motion. IN FAVOR: Senator Taylor, Senator Hoffman and Senator Olson OPPOSED: Senator B. Stevens, Co-Chair Green and Co-Chair Wilken ABSENT: Senator Bunde The motion FAILED (3-3-1) The amendment FAILED to be adopted. Amendment #4: This amendment increases the base student allocation from $4,169 to $4,280. Senator Hoffman moved for adoption. Co-Chair Wilken objected. Senator Hoffman remarked, "The cost of education has been stagnant" and that the National Education Association-Alaska and some school districts support the amount proposed in this amendment. Senator Taylor expressed concern about the unknown amount of education funding that would be appropriated in the FY 04 operating budget. He reminded that he has supported the proposed increase in the past and would continue to support it. Co-Chair Wilken pointed out the fiscal note for this amendment would be approximately $41 million. Mr. Jeans affirmed. Senator Bunde moved to amend the amendment to change the funding source to earnings of the permanent fund. Co-Chair Wilken objected. A roll call was taken on the motion to amend the amendment. IN FAVOR: Senator Bunde, Senator Hoffman and Senator Olson OPPOSED: Senator B. Stevens, Senator Taylor, Co-Chair Green and Co- Chair Wilken The motion FAILED (3-4) The amendment FAILED to be amended. A roll call was taken on the motion to adopt the amendment. IN FAVOR: Senator Hoffman, Senator Olson and Senator Taylor OPPOSED: Senator Bunde, Senator B. Stevens, Co-Chair Green and Co- Chair Wilken The motion FAILED (3-4) The amendment FAILED to be adopted. Co-Chair Wilken recalled a discussion between himself and Mr. Jeans regarding instituting a specific funding amount into statute rather than a funding formula. Mr. Jeans explained the option of listing in statute a specific dollar amount to be appropriated to each school district. He cautioned against this practice, warning that individual districts would begin lobbying for an increase to their district. He furthered that it would be difficult to justify funding changes to one districts without reviewing all districts. Senator Taylor countered that rather than assigning a specific funding amount to each school district, this legislation institutes a formula based on number of students enrolled during FY 03. He expounded on the inequity of this system to school districts that have declining enrollment. Senator Hoffman recalled provisions included in the legislation establishing the foundation funding formula to address the "eroding floor" in an attempt to achieve equity. He asked whether a similar provision has been considered for this formula program as well. He exampled that an upper limit of $1,000 per student could be phased in so that over a period of time, "restraints" could be imposed to address those routes currently costing $1,200 per student. Co-Chair Wilken asserted that changes would not be made to increase funding to this program. He pointed out this has been a "cost plus" program across the State and he surmised that program managers would identify sufficient funding to operate routes as efficiently as possible. SFC 03 # 96, Side A 12:52 PM Co-Chair Wilken continued that decisions on how to efficiently deliver education services must be made locally by school boards rather than by the legislature. He predicted this legislation would result in a "vast improvement" in the operation of the pupil transportation system and funds saved that could be spent "in the classroom". Senator Taylor agreed with Co-Chair Wilken's concerns about the rising costs of pupil transportation and pointed out that until recent years, the legislature has not fully funded these expenses. He surmised this caused the costs to rise dramatically and inefficiencies especially in larger school districts with "economies of scale". He stressed that much of the expense is the result of federal mandates and compliance with the Americans with Disability Act requirements. Senator Taylor referenced the hold harmless provision intended to limit the impact to the two largest school districts from the consolidation of the LOGs into the funding formula. He asserted that a hold harmless provision should be adopted for the proposed pupil transportation grant formula to limit the impact to schools with declining enrollment. Co-Chair Wilken agreed this proposal does not include a hold harmless provision, although "token" funding would be allocated to limit the impact. He cited the higher costs of transporting certain special needs students and the significant percentage this comprises of the total pupil transportation expenditures. He referenced a spreadsheet titled, "Department of Education and Early Development, Reimbursable Transportation Costs Per Student (Regular V. Sped)--FY 02, May 8, 2003". Mr. Jeans qualified the information on the spreadsheets was gathered from each school district and includes transportation of all special education students, not just those requiring additional assistance, such as full time aid workers or wheelchair lift. Mr. Jeans reiterated that the higher cost of transporting special education students is included in the base formula. He relayed the concern of school districts is their "profile" would change "so dramatically" as to be negatively affected by this program. He stressed that 100 percent of the special needs expenses are currently reimbursed by the State. Senator Taylor asked how special education student transportation cost increases would be addressed in contract negotiations. Mr. Jeans responded these costs are currently reimbursed calculated by dividing the student population by the total transportation cost per district to determine the allocation for each district. He explained that this formula does not make adjustments if the percentage of special needs students in a district increases. Senator Taylor commented that currently, the funding is provided based on the needs of students and that under this proposal future funding would be provided based on the total number of students, regardless of their special needs. Mr. Jeans affirmed, and again voiced the concern of school districts that the amount of funding does not increase if the percentage of a district's population that has special needs changes. Senator Bunde surmised that such percentage increases have not occurred in the past. Mr. Jeans affirmed. Senator Taylor agreed with Senator Bunde that such changes have not occurred historically on statewide average. However, he remarked that the percentage change considerably in smaller school districts when "a family moves to town" that has one or more special needs children. Co-Chair Green offered a motion to report the bill, as amended from committee with accompanying and new fiscal notes. There was no objection and CS SB 220 (FIN) MOVED from Committee with fiscal note #1 of $32,136,600 for the Department of Education and Early Development, K-12 Support BRU, Foundation Program component, and a new fiscal noted dated 5/14/03 of $10,745,600 for the Department of Education and Early Development, Pupil Transportation BRU and component. AT EASE 1:02 PM / 1:03 PM AT EASE 1:03 PM / 4:52 PM