SB 36 PUBLIC SCHOOL FUNDING SB 85 PUBLIC SCHOOL FUNDING/CHILD CARE GRANTS  Number 225 CHAIRMAN WILKEN introduced SB 36 and SB 85 as the next order of business before the committee. COMMISSIONER SHIRLEY HOLLOWAY , Department of Education, noted that many present have been part of the numerous efforts to rewrite the formula. Commissioner Holloway said that Deputy Commissioner Cross would inform the committee of what the department views as strengths and areas of concern with the CS. RICK CROSS , Deputy Commissioner of the Department of Education, identified the following areas as strengths of the bill: Allocating money on a per student basis. The 20 percent indicator for funding special needs students. Separating the funding for intensive needs students. The minimum school size at 10 students. Addressing single site schools within the formula. The expansion of the area cost differential study. Assigning area cost differentials to funding communities. The elimination of considering impact aid. Mr. Cross said that there are four areas of significant difference between SB 85 and CSSB 36(HES). Each of these four areas will shift money from districts with little or no ability to provide funding to those districts with the ability to provide funding. The first area of difference is the required local effort. Under SB 85 the required local effort is maintained at the current 4 mills. Under CSSB 36(HES), the required local effort is dropped to 3 mills. This drop decreases the size of funding school districts that are allowed from the required local sources. If the pie remains the same as Mr. Cross believed to be the intent of CSSB 36(HES), then the local portion is smaller and therefore the state's share is larger. If the state's share is kept constant, then money will be shifted from those districts without the ability to pay, REAAs, to those districts with the ability to pay. Secondly, SB 85 contains a supplemental equalization factor. Supplemental equalization is the ratio of a district's wealth to a statewide average which is inversely proportional to the amount of money the district receives from the state. The wealthier a district is, the less that district receives from the state. This factor would compensate poor districts. The third area of difference is transportation. CSSB 36(HES) keeps the transportation factor outside the formula as under the current formula. Transportation is the only area in education which has been compensated for inflation. As written, the transportation regulations and statutes provide that as the cost of providing education increases the compensation to districts that have transportation programs increases. Mr. Cross said that was not true for the foundation formula. Those districts with transportation programs have received an inflationary increase, but those districts without a significant transportation program have not which would be continued under CSSB 36(HES). Mr. Cross noted that those districts with transportation programs tend to be the wealthier districts with the ability to pay. Therefore, this is a third mechanism which would shift funding from poorer districts to wealthier districts. Number 341 The fourth difference is the taxation. Mr. Cross said that he would be discussing the impact of taxing REAAs. Currently, the REAA pie has only one piece, state aid. Federal aid is ignored under SB 85 and CSSB 36(HES). Under CSSB 36(HES), there would be a method of taxation requiring the REAA to provide the equivalent of a minimum local effort. Therefore the REAA's pie has a state and a local piece. Mr. Cross understood that CSSB 36(HES) would leave the state funding constant which would mean that the REAA local piece would be placed in the pot and be redistributed. This is the fourth manner in which dollars would be shifted from poorer districts to those districts with the capacity to pay. Mr. Cross did not believe there had been any discussion allowing REAAs to have excess capacity. The purpose of the taxation is to provide for the REAA's local effort and supplant state effort. The REAA would not be able to generate additional funds beyond the required minimum local effort as all organized boroughs are allowed and under CSSB 36(HES) without limit. Currently, the minimum required local effort is 4 mills. On a statewide basis, the organized boroughs are contributing to education on average over 7 mills. There is significant additional effort provided in areas where people have the capacity to pay which the method of taxation under CSSB 36(HES) would not provide to REAAs. In conclusion, Mr. Cross emphasized that the impact of the four mechanisms he discussed is excessive and would not fairly distribute dollars to districts. Number 387 COMMISSIONER HOLLOWAY discussed the incentive level of additional funds for those schools who try to achieve the Quality School Initiatives under SB 85. The Quality School Initiatives has the following four components: high academic standards for students as well as a mechanism to assess those standards, high professional standards from an evaluation and licensure perspective, networking between the school, the community and other agencies, and school excellence standards driving the new accreditation system. Commissioner Holloway emphasized the need to stop giving dollars to districts without the expectation of an increase in student learning. Across the nation, struggles to improve the quality of schools are occurring. Commissioner Holloway informed the committee that she had just returned from the Chiefs States School Officers meetings where one of the major topics was regarding improving schools and fixing the failing schools. No matter the political affiliation, those at the meeting agreed that high learning standards and assessing those standards must happen. Commissioner Holloway urged the committee to include in any foundation formula, core learnings and a mechanism to assess that learning. Everyone has an obligation to ensure that every student leaves the system with the skill and knowledge to make choices about their lives. Commissioner Holloway quoted statute that supported this obligation. Unless the expectation is tied to the funding, that expectation will not be achieved. Number 433 SENATOR WARD said that he had not heard from anyone that supported SB 85. COMMISSIONER HOLLOWAY did not believe that anyone would support a bill in which his/her school district is not perceived as a winner. Historically, that has been the problem with any foundation formula. Many would like to maintain the current formula and request more dollars. Commissioner Holloway was frustrated that no support could be garnered even for a proposal that adds money to the foundation formula. SENATOR WARD understood Mr. Cross' comments to mean that CSSB 36(HES) attacks the rural or poor in favor of the rich portions of the state. Does the current formula treat everyone fairly? RICK CROSS explained that currently, there are areas that do not have the capacity to generate revenue while other areas have that capacity. Until that is changed, that must be accepted when developing a foundation formula. CSSB 36(HES) has four powerful mechanisms which shift money from those areas without the ability to generate revenue under the current laws to areas that do. The compounding of those four mechanisms will have a marked and dramatic effect. With regards to the lack of support for SB 85, Mr. Cross said that some had stated support of SB 85 to him. He credited the Governor and the committee with accepting that the current formula cannot continue. Mr. Cross offered to work with the committee. SENATOR WARD reiterated that he had not found anyone that supported SB 85. If there is something out of balance, why was it not fixed before. Senator Ward suggested that the department submit recommended changes to the CS. Number 501 CHAIRMAN WILKEN believed that the initiative was Level III. If this type of initiative is necessary, why imbed such an initiative in a yearly entitlement where it would be lost. Chairman Wilken asked if it would be better to take the concept of the Quality Schools Initiative outside the foundation, review how it works on a test basis. If it improves some schools, then the initiative could be brought back. COMMISSIONER HOLLOWAY stated that the connection between the money provided and the expectations of the school should be reviewed. Commissioner Holloway looked forward to future conversations with the committee regarding that issue. CHAIRMAN WILKEN believed that Level III was a variable that did not add to the current goal. Chairman Wilken requested that Mr. Cross explain the transportation mechanism sometime. Chairman Wilken asked Mr. Cross if he meant that if the four components are left untouched, there is concern that the educational opportunity would be diminished for some in different regions of the state. RICK CROSS agreed that was his concern. When there are multiple factors that do the same thing within a complicated system, compounding occurs and a greater impact results. Mr. Cross believed that to be the case. COMMISSIONER HOLLOWAY mentioned that during the shift to unorganized boroughs, the Legislature committed to being the REAA's borough assembly. That commitment has not been upheld. SENATOR LEMAN noted that Mr. Cross said that the current formula is inequitable, yet the attempts to create greater equity as Mr. Cross says creates shifts in the same direction. Senator Leman said that Mr. Cross may be right that the correction may be occurring in one direction, but suggested that review of the current situation and the end result is necessary. The corrections are fairly small. For example, Hydaburg receives $8,400 per student per year, Anchorage receives $4,000 and Ketchikan receives $2,900. Those numbers still illustrate the inequity in distribution, but not by taking from the poor and giving to the rich. If a correction is applied, whoever wins supports the correction while whoever losses complains. For that reason, there has been no significant change in the formula in the past. RICK CROSS realized the need to correct, however there may be a greater level of correction occurring than anticipated due to multiple factors with the same effect. As the formula ages, the correction may be more than anticipated. SENATOR LEMAN agreed that Mr. Cross may be correct and said that he wanted to review that. TAPE 97-28, SIDE B Number 586 ROBERT HERRON , President of the Lower Kuskokwim School Board, believed that all testimony has echoed the same basic message voters last Fall supported: take care of education. Mr. Herron said that the ground rules of simplicity, equity, and timing encompassed in CSSB 36(HES) are sound. However, the fourth ground rule of no new dollars is flawed. Mr. Herron stated that no new dollars will not work. PATRICK DOYLE , Superintendent of the Copper River School District, informed the committee of the seven communities with schools in the district which serve a total of 600 students. Two of the schools are one room schools. Additionally, a correspondence school is operated with approximately 170 students of which over 100 are from outside the borders of the Copper River district. Mr. Doyle stated that over the past 15 years, the Copper River district has undertaken every possible conservation measure to reduce the costs of operation without affecting the educational opportunities of its students. Staff was asked to do more and accept less. The staff has given up many of the things that most teachers take for granted. The Copper River district operates its extra-curricular activities with volunteers. In spite of all the obstacles, the students in the Copper River School District perform among the best in the state and continue on to high levels of success. The latest reverse "Robin Hood" strategies of the Legislature may deliver the proverbial straw that breaks the back of the Copper River School District. The school districts of Alaska have been reduced to competing with one another for a pool of dollars that is too small to meet the educational needs of the students of Alaska. Mr. Doyle indicated opposition to the concepts of CSSB 36(HES). What is the equity in shifting inadequate financial support from one group to another? Where is the accountability from those who provide the funding to produce quality education? Mr. Doyle noted that he would forward his comments to the committee. Number 513 ROBERT MCCLORY , parent and counselor in Ketchikan, did not believe that his testimony was significantly different than others, but he felt compelled to share his thoughts with the committee. He discussed the impacts of the pulp mill's closure, particularly the sizable cuts to the schools. Mr. McClory mentioned the hold harmless clause and urged the committee to make the Educational Endowment Fund a reality. Mr. McClory informed the committee of the following statistics found in the Educational Background & Economic Status of the Spring of 1990. Those with a degree beyond high school on average earn $2,231 per month as compared to $1,077 for those with a high school diploma. High school dropouts on average earn $492 per month. Doctoral degrees boost earnings to $3,855 per month and those with special degrees earn about $5,000 per month. Mr. McClory urged the committee to show students that just as politics can negatively impact the job market, so too can the leaders positively shape the future. TAMMY MORRIS , parent in Ketchikan, informed the committee that she and her family had moved to Ketchikan from Fairbanks one and-a-half years ago. Ms. Morris noted that she had visited the schools in Ketchikan to determine whether the move would be good for her children. However there was a flaw in the planning, Ms. Morris did not consider inquiring about the funding status of Ketchikan schools. Only after relocating, when Ms. Morris' children began attending the Ketchikan schools did she realize there was a problem. The schools in Ketchikan were not equal to those in Fairbanks. Ms. Morris informed the committee that Ketchikan schools do not have a nurse while Fairbanks schools do. Ketchikan students only receive one half hour of music each week. Ms. Morris noted the lack of physical education and current learning materials in Ketchikan. Ketchikan elementary schools do not receive any counseling services while Fairbanks schools do. One librarian in Ketchikan divides her time among four elementary schools while each Fairbanks school has a librarian. If funding continues in the same manner, the list will be longer. Ms. Morris was ashamed that there is adequate money in Alaska, but not all Alaskan children have equal funding for education. The Ketchikan district has been supporting the school district with as much as allowed, the difference can only be made by the state. DIANE GUBATAYAO , parent and Ketchikan Gateway School Board Member, informed the committee of the January 1997 Education Week which grades Alaska with a D+ in equity and an F on allocation. With regards to the ties between quality education and teacher funding and higher standards, Ms. Gubatayao asked if there have been studies that show flat funding in education lead to a decline in education. She mentioned the increase in oil prices and permanent fund dividends. In conclusion, Ms. Gubatayao said that she was looking for someone to realize that funding is inequitable. Number 415 MIKE MURPHY , Chairman of the Nome School Board, stated that none of the proposals solve the issues of accountability, equity, fairness, and simplicity. Mr. Murphy suggested that schools be funded in a two tier system. The operations and maintenance of the schools should be funded first and then education. Depending upon a schools location in Alaska, the cost of operation is different. For example, if $5,000 per student is received for school A and it costs $1,000 per student to maintain school A while school B only needs $500 to operate and maintain school B, then school B is able to spend $500 more on education. That is not fair or equitable. If costs for operation and maintenance are taken care of statewide, that would be fair because those are fixed costs. Mr. Murphy proposed that an average of operations and maintenance costs be taken from the past five years in order to establish the state's share. However, the state must be willing to fund increases or decreases as they occur. Also incentives should be offered to those school districts that work to lower costs. If a district saves $50,000 by reducing energy costs, the state could give the district a percentage of the savings. Now that operations and maintenance costs have been funded, education can be funded. Mr. Murphy pointed out that several problems in the current proposals will disappear once the cost of operations and maintenance are dealt with. First, the dollars for education become more equitable and fair because education is being funded alone. Second, the area cost differential battle becomes smaller. The figures are no longer skewed for the high cost of operation and maintenance in rural Alaska. The cost of education is fairly average statewide when comparing teacher's salaries. Mr. Murphy did acknowledge differences in the cost of freight. Mr. Murphy stressed that education becomes more accountable when funded alone. Mr. Murphy also mentioned that the foundation formula has not kept up with inflation. DAVID STONE , testifying from Point Hope, informed the committee of Resolution 97-13 which requests $10 million for annual educational support for the North Slope Borough School District. This amount would not even pay for operating two of the larger schools in the district. Mr. Stone opposed any reduction to the already inadequate educational funding from the State of Alaska. He also opposed any legislation changing the foundation formula such that the North Slope Borough would be required to provide financial support to the rest of the state. The City Council of Point Hope is opposed to any action by the Legislature that would reduce or redistribute the current foundation funding of the North Slope Borough. The City Council of Point Hope supported the current foundation funding formula. Mr. Stone said that any decrease in funds would be devastating, especially in the Point Hope area. Mr. Stone noted the air travel necessary in the North Slope. CHAIRMAN WILKEN commented that the students from the North Slope did a great job testifying before the committee last week. Number 325 KIM FRANKSON , Parent and School Advisory Council member from Point Hope, discussed the impacts that would result with the loss of funding to the North Slope. The loss in funding would result in the loss of services, such as access to libraries, to the students and residents of the North Slope. Ms. Frankson indicated that the loss of funding could result in an increase in the welfare, social service, and unemployment rolls. Ms. Frankson pointed out that people can lose their jobs as a result of the proposals before the committee. CHAIRMAN WILKEN inquired as to the number of people wanting to testify in Point Hope. After discovering that four or five more desired to testify, Chairman Wilken invited those folks to fax their testimony or have one person speak for those remaining. OLIVER LEAVITT , North Slope Borough Assembly member, noted that the committee had the full text of his testimony. The North Slope has been painted into a corner. The people of the North Slope are opposed to being zeroed out. Mr. Leavitt noted that the Mayor and the Assembly members believed that the foundation funding proposals are unlawful under the Alaska State Constitution as well as federal laws. Mr. Leavitt quoted Article VII, Section 1 of the Alaska State Constitution, the public school provision, which does not permit the Legislature or the state to arbitrarily deny the school children of the North Slope any and all state aid for education. Most of the state education budget is produced by taxes and royalty on the North Slope oil. Although the Inupiat Eskimo people opposed the North Slope oil development in the 1960s, an informal accommodation was reached between the residents of the North Slope, the oil industry and the state. Mr. Leavitt stressed that now a major effort to deny any state education benefits to the residents of the North Slope is underway. This is mean spirited, short sighted, harmful to our children, and contrary to the state's long term economic interests. Mr Leavitt contended that this foundation formula effort is diverting the borough's scarce resources from projects that could generate revenue for the state, the borough, and for the children. In conclusion, Mr. Leavitt emphasized that the quality of education of the children of the North Slope will be protected. Other local funding sources for North Slope schools will have to be found if K-12 education funds are eliminated. Mr. Leavitt identified the following options if state aid is lost: raising the millage rate from 18.5 to 20 mills, imposing annual regulatory and license fees on new energy projects, and increasing other tax and license fees on the oil industry. Mr. Leavitt requested that the committee work with the borough on this issue. CHAIRMAN WILKEN noted that Barrow had just joined the meeting via teleconference. He asked that those wishing to testify fax their testimony because there would not be time today to hear from Barrow. Chairman Wilken asked if Point Hope had chosen a speaker. Number 195 CAROLINE CANNON , Mayor of Point Hope, opposed any changes to the current foundation formula in the North Slope School District. Mayor Cannon discussed the community uses of the school facilities and the high cost of living in the North Slope. Mayor Cannon identified adequate funding by the state as the problem. Alaska has a constitutional responsibility to provide adequate funding for all. Mayor Cannon also pointed out that this proposal may be unconstitutional because it may discriminate against a community that is 95 percent minority.