SHES - 2/18/95 SB 70 PUBLIC SCHOOL FOUNDATION PROGRAM  Number 002 CHAIRMAN GREEN called the work session for Senate Health, Education and Social Services (HESS) Committee to order at 1:07 p.m. She introduced SB 70 as the only order of business for the work session. JERRY BURNETT, staff to Senator Randy Phillips, explained that SB 70 is a vehicle for providing maximum equity in the foundation formula. Mr. Burnett highlighted the changes encompassed in SB 70: (1) SB 70 would replace the area cost differential, currently in statute, with the Alaska school price index which would be defined in regulation by the Department of Education. (2) SB 70 would increase the required local match to the lesser of 4 mills or 50 percent from its current 4 mills or 35 percent. Mr. Burnett noted that there are currently only three school districts who pay less than 4 mills at the 35 percent level and they would pay more local taxes as a result. (3) SB 70 defines the funding community to include no less than 16 students in average daily membership. Currently, approximately 35 funding communities have less than 16 students which would result in some loss of funding for those communities. He suggested that an alternative service delivery system could be used in those areas. (4) SB 70 recognizes overcrowding in the larger elementary schools and therefore, changes the divisor in the elementary school formula from 17 to 16 for schools having more than 525 in average daily membership. This change would effect most of the larger schools and would increase their funding. (5) Section 7 of SB 70 would provide for additional funding for single site schools who are not currently acknowledged in the formula as needing additional funding. Each year single site schools are added to the funding bill by the legislature which has caused much grief in the past. Number 102 CHAIRMAN GREEN asked if SB 70 addresses how average daily attendance is determined. JERRY BURNETT said that SB 70 does not address that other than the change in the timing of the student counts within the school district. WANDA COOKSEY, representing Single Site School Districts, informed everyone that there are 21 single site school districts in Alaska with about 6,000 students which add up to be 39 percent of the school districts. There has been inequity in the funding of single site schools since the foundation formula was written. Every year single site schools come before the legislature to request for funding. She clarified that in the past three legislative sessions, single site schools have received grant funding in the same amount as requested in the proposed formula by these schools. The proposed formula would allow a single funding community to be considered a school district. CHAIRMAN GREEN asked if Ms. Cooksey felt this would be an equitable solution for single site districts. WANDA COOKSEY explained that the proposed formula for single sites addresses the same percentage as the consortium, with the exception that SB 70 would recognize this problem in schools of average daily membership (ADM) of 900 or fewer, up from the consortiums ADM of 800 or fewer. SENATOR SALO referred to Section 3 of SB 70 when inquiring as to how much revenue would be generated with the change from 35 percent to 50 percent. JERRY BURNETT stated that it would generate approximately $3.5 million per year. In response, to Senator Salo, Mr. Burnett said that the potential closure of 35 schools with less than 15 students would generate approximately $4,169,000 in revenue next year. SENATOR SALO asked if the change in Section 5 from 10 to 5 percent of the instructional unit was addressing the Wrangell situation. JERRY BURNETT explained that this change was originally proposed to address the situation in Sitka last year, however, the change would allow a hold harmless situation for some of the smaller schools who lost funding communities under Section 4. Senator Salo clarified that the change would provide a phase out period for small population schools that would no longer be funded. Number 201 SENATOR SALO inquired as to the cost of the change in the elementary divisor. JERRY BURNETT said that it is estimated at $11.7 million for 1996 fiscal year. SENATOR SALO asked when the school price index was developed. JERRY BURNETT explained that the school price index would go into effect in the 1997 fiscal year. He clarified that the reference to 1999 on the last line of page 4 of SB 70 referred to the first adjustment in the school price index. Mr. Burnett, speaking for the sponsor, said that the school price index figures would be similar to the ones developed by the Department of Education. SENATOR SALO asked if Senator Randy Phillips would be interested in changing the school price index in 1996. JERRY BURNETT said that he could not speak to that issue. LARRY WIGET, Director of Government Relations for the Anchorage School District, stated that the Anchorage School Board adopted the rewriting of the foundation formula as one of its top legislative priorities. Currently, Anchorage composes 40 percent of Alaska's student population while the district receives 30 percent of the funding. The rewrite of the formula would address the actual needs of larger districts. He supported the change in the elementary divisor, the secondary divisor, and full funding of the Alaska School for the Deaf. To operate the School for the Deaf costs the district $755,000 more than they receive in funding. He indicated the possibility of increasing the foundation unit. He urged the legislature and the governor to rewrite the formula in an equitable manner. Number 270 GEORGE MAYKOWSKI, Superintendent of Schools of the Copper River School District, explained the many goals and programs that the school districts have been working towards in order to improve instructional delivery to students. There has been much success in these goals and programs which now will face funding cuts. He felt that the time to review the delivery of fiscal support was once a plan or goal was achieved. He noted that his district faces the possibility of laying off employees, especially those hired to achieve the goals the legislature had previously urged. He stated that his district faces a possible $100,000 deficit next year in order to maintain the status quo. SB 70 has a lot of unknowns. In conclusion, Mr. Maykowski suggested that the educational system should achieve some of the goals before them and then evaluate the system. BRAD BRINGGOLD, parent, asked how SB 70 would effect the overall amount of funding for education. JERRY BURNETT said that SB 70 would increase the total amount spent on education by an estimated $9 million. Mr. Burnett was not aware of any way in which SB 70 would change the state's commitment to funding good education. Number 343 DAVID DOSSETT, Southeast Island School District Superintendent, supported the Alaska school price index. He expressed concern with the minimum of 16 students required for a funding site. Of the 12 schools in the Southeast Island School District one school already faces closure at the current requirements. The new minimum requirements in SB 70 would close four other schools and leave two schools in a borderline situation. Mr. Dossett explained that most of the schools in this district are located in either fishing or logging communities. He did not understand how the state could spend lots of money funding Alaska 2000 and then force students to use alternative delivery systems in order to save money. The state funds the creation of new communities and then lets them become ghost towns or retirement communities when the schools are closed. He said that the logging communities and schools are small due to federal restrictions on the industry and state education cuts would hurt these areas. He urged the committee to keep the economic impact of this new minimum requirement in mind; closing schools with less than 16 students will ultimately cost the state. BRUCE STANTON, teacher and parent, stated that he was angry about the state of education. He pointed out that there is no inflationary adjustment in education funding; Ketchikan will receive a $6 per student increase in ten years while inflation has risen by 40 percent. Mr. Stanton reviewed the American Chamber of Commerce Research Association's cost of living statistics for cities in Alaska. He stated that Anchorage was 29.6 percent above the national average of the cost of living while Ketchikan was 56.2 percent above the national average; Anchorage should not have the same area cost differential as Ketchikan. He noted that Ketchikan has reached their local cap for years and now the cap will be reduced from 20 percent of basic need to 19 percent. Mr. Stanton asserted that fixing the problems of education will require spending. SB 70 is a good place to begin the solution. He suggested that if the state does not recognize inflation then the local communities should be allowed to contribute more. He offered his help in finding a solution to this problem. Number 444 MIKE HARPOLD, Board of Education member for the Ketchikan Gateway School, appreciated the introduction of SB 70. He stated that the Ketchikan Gateway Borough fully funds education to the present cap. He pointed out that this district will have to absorb increased costs due to increased inflation while the local contribution will be decreased by 4 percent due to federal regulations. In order for the Ketchikan Gateway Board of Education to achieve a balanced budget, they must cut revenue by an additional $706,000 over what they are currently attempting to cut. He noted that last year the board cut music, library, and physical education programs in elementary schools by 50 percent. He reviewed the change in the instructional unit and the replacement of the area differential with the school price index. He pointed out that cost disparities hurt laws requiring equal education across the state. He said that if there is no change in the application of the formula, then the instructional unit value would need to be increased by $2,050 to $63,050 in order for the Ketchikan Gateway district to fund next year's programs at the same level as this year. CHAIRMAN GREEN pointed out that any individuals interested in offering written suggestions or comments on the foundation formula issue are welcomed to do so. SCOTT STERLING inquired as to how the overall increase of spending on education of $9 million would be calculated. JERRY BURNETT explained that various sections of SB 70 decrease and increase the total amount of funding, but the change in the elementary divisor results in the most significant increase. That portion increases total funding by $11.7 million. Mr. Burnett pointed out that the Mat-Su district, with the new elementary divisor, should have an increase of approximately $800,000. MELINDA BROOKS, parent and member of the Mat-Su School District Budget Advisory Commission, stated that the commission has given her a look at the possibility of tremendous losses in education. CHAIRMAN GREEN noted that SB 70 was intended as a starting point in dealing with the funding of education. MIKE MURPHY, representing the Nome Board of Education, supported some portions of SB 70 such as the inclusion of the single site school issue. He commented that everyone wants to provide a quality education for Alaska's children, but difficulties arise when districts are fighting for funding to operate. He expressed concern with the school price index because it has not been defined. Depending upon which price index formula is used, Nome could face a difference in funding from $400,000 to $1.2 million. He reiterated the need to rewrite the foundation formula. He stated that inflation is the biggest problem with the foundation formula. If the foundation formula had kept up with inflation then the funding unit would be approximately $76,000 in today's dollars. He said that the rewrite of the formula will not work without addressing inflation. CHAIRMAN GREEN noted that Duane Guiley would be giving another presentation explaining the foundation formula. HARRY ROGERS, Superintendent for Valdez, noted that fair and equitable seemed to mean when a group received more money. He expressed concern that the changes encompassed in SB 70 seem to move funding from the rural areas to the urban areas; there is not a lot of money added to the formula. Any minor changes in SB 70 could have tremendous ramifications, especially in small districts. He pointed out that Section 3 changes the required local contribution from 35 percent to 50 percent which would result in a 10 percent decrease in Valdez's operating budget. Sections 1 and 2 regarding area cost differentials would also have major consequences for small districts. He did not feel that the McDowell Study would offer the appropriate numbers to solve the problem. TAPE 95-6, SIDE B Number 578 REYNE BROCKMAN, President of the PTA of Lottie Sparks, reviewed the growth in enrollment of the school over the past years. She said that the Lottie Sparks' schools would be in jeopardy if the minimum enrollment changes to 16. This school is a three hour bus ride into Glenallen and correspondence is not an option for most families. She emphasized that consolidation would not be cost effective in this district which encompasses 24,000 square miles. Reducing funding will hurt the needs of smaller rural schools while benefitting the larger schools. She concluded that the social, economical, and educational effects of closing these smaller schools would be devastating for those communities. BOB HARTY, Interim Superintendent for the North Slope, expressed concern with the change in the required local support and the change from the area cost differential to the school price index. He indicated that the price index's calculation by the Department of Education seems to place greater restrictions on small rural areas while benefitting the urban areas. He opposed SB 70 as it is currently written as an unequitable burden on the North Slope Borough. PATTY GRAVES, Cordova School District, felt that SB 70 place rural areas at a disadvantage. In rural areas, the cost of education is usually higher and there is a limited tax base from which to draw revenue. She pointed out that urban areas such as Anchorage could have a sales tax and draw revenue from visitors while rural communities with a sales tax, like Cordova, have limited access to outside revenue. She expressed concern with the minimum enrollment requirement change. She pointed out that Section 5 seems to contain a set amount of money which would not change even in the face of increased educational costs. Therefore, districts will receive less money. She supported the single site portion of SB 70. CHRIS CAMPBELL, parent and member of the Valley Park Elementary School PTA Legislative Committee, stated that SB 70 is a good beginning to providing funds to the school districts. She reiterated the need to address an inflation adjustment and local match in SB 70. She was astonished that Valley Park receives the lowest amount of funding in the state. Number 512 NICK FITZGERALD, teacher and parent in Ketchikan, stated that budget cuts tear communities apart. He commented that the school price index needs to be a mathematical calculation not a political tool. He reiterated the budget cuts facing Ketchikan; they will cut about 16 teachers. SB 70 is a start. JOHN ANTONNEN, Executive Director of the Southeast Regional Resource Center, reiterated Mr. Harry Roger's sentiment that the problem with the foundation funding formula is that equity is in the eye of the beholder. He suggested increasing the unit value, the inflationary cost in education, while attempting to find a venue out of this inequitable funding formula. He supported the single site revisions in SB 70. He felt that the price index with its winners and losers is somewhat better than the area cost differential. The winners and losers of the price index could create resistance to changing the formula. He indicated the need for relief from the 19 percent cap. This relief from the U.S. Department of Education could happen if Alaska attempts to rewrite the formula. He urged reviewing the increase in the instructional unit value because it would increase funding for every district in the state. GEORGE MAYKOWSKI pointed out that seasonal employees like those in his district move about and the school system is set up to accommodate that movement. These type of districts would not benefit from the change in the date of the count of students. He suggested having an earlier date or having two dates and averaging the student counts in order to receive a true estimate of enrollment. JERRY BURNETT explained that Section 11 of SB 70 allows the Commissioner to permit district's having a different period in which to report the counts for average daily membership. GEORGE MAYKOWSKI expressed the need for more work on this and offered his services.