HB 191-CHARTER SCHOOLS REPRESENTATIVE FRED DYSON, sponsor of HB 191, gave the following explanation of the proposed committee substitute. The Alaska charter school bill passed prior to his election to the Legislature. Former Representative Bettye Davis believed the original law would not work and would need to be revisited. People who have spent a lot of time working with charter schools say that Alaska's law is one of the weakest in the nation. The proposed committee substitute does four things. It doubles the allowable number of schools and removes the geographical distribution. It extends the contract period and the sunset date. Charter schools that want to buy commercial real estate, or those schools that rent and need significant improvements to meet school standards, will benefit from longer term contracts. Third, the bill answers the question of where the money goes that the charter schools do not get. Most school districts receive about $7,000 to $8,000 per student while charter schools receive about $3500 per student or less. HB 191 requires schools to perform accounting procedures to let the charter schools know where the money they do not get goes and to give them some idea of the cost of services that they may choose. The Anchorage and Fairbanks school districts have maintained they cannot produce those figures. He is convinced they cannot and it would be an undue burden on them to show that kind of accounting detail. The Anchorage and Fairbanks school districts can account for how much special education costs district wide, but they cannot break that number down by school. The same applies to all kinds of other special services. Fourth, HB 191 also allows charter schools to locate into commercial space that may not meet school fire safety standards with the approval of the fire marshall. Because a charter school may have a much smaller number of students, the rigid school building safety standards may not be necessary in order to operate safely. REPRESENTATIVE DYSON summarized by saying there is an immense amount of enthusiasm for charter schools in Alaska. There is quite a bit of interest in Native language schools and a school in Anchorage wants to teach Mandarin. Number 475 SENATOR WILKEN moved to adopt Version W as the working draft of the committee. There being no objection, the motion carried. SENATOR WILKEN asked Representative Dyson to explain the new language on page 2, line 11, which reads, "including the itemized costs of administrative or other services to be provided." REPRESENTATIVE DYSON said he worked with the Anchorage School District for 1+ years on that provision. The disctrict was concerned that itemizing costs would require every employee to keep tabs on everything they do. Representative Dyson said it is not his intention to require school districts to keep the kind of detail an attorney would, for example, to track billable hours. When school districts sit down with a charter school to negotiate a contract, he wants the district to be able to tell the charter school group that if it takes special education students, funds will flow to the school for those students. During the negotiations, the charter schools want to know what the cost of accepting or foregoing certain responsibilities is. WES KELLER, Chief of Staff to Representative Dyson, added that the Juneau School District includes an itemization that is not too detailed but gives a brief outline of where the money comes from and where it goes. SENATOR WILKEN stated that the expectation today might not be for a detailed itemization, but over the years it will increase and add to the burden of school districts to set up a different "profit center." He also expressed concern about language beginning on line 29 which reads, "in this paragraph, operating cost savings means the estimated value of educational or related services provided by the district to all schools in the district that are not provided to the charter school." He asked how that value is to be quantified and how that can ever be structured at any level other than the local school board level. He pointed out if the Anchorage School District wants to offer Mandarin, it can do so but it needs to put up its money so as to not detract from other efforts across the state to provide general education. He expressed concern that in these days of tight K-12 money, this bill seems to broaden the requirements and includes a new part which is very expensive per student. He emphasized that his concern is with the limited dollars that need to be spread around. Number 772 REPRESENTATIVE DYSON responded that if Senator Wilken's concern is that charter schools themselves are expensive, they actually cost less per student than other schools. SENATOR WILKEN said as he understands the history of the issue, the deal struck in 1996 was that the State monies are to be directed to charter schools. Anything over and above that - the Mandarin school example - is a local option. He said he interprets this bill as saying the local option is not being funded therefore the legislature needs to tell the school boards what to fund in regard to charter schools. REPRESENTATIVE DYSON disagreed and said that people in the charter school community look at the amount of money that they get per student and notice that all they get is the State share. He does not believe that is true as the districts get money from the State, the federal government and a local contribution. The district takes its administrative costs and special program costs out of that pot and then the remainder is distributed to all of the schools in the district, including charter schools. SENATOR WILKEN asked if, by law, that number has to be at least equal to the State's contribution to that district per student. REPRESENTATIVE DYSON said he did not know. SENATOR WILKEN repeated that he believes the law says the school districts must spend x amount on charter schools and that amount should not be less than the State's share for that district. He said he would check to see if he is correct. Number 932 SENATOR PETE KELLY noted that is the amount allocated for the charter school in Fairbanks. SENATOR ELTON referred to page 2, line 11, and asked what other services should be provided. He noted that phrase could include pupil transportation costs and computer training. REPRESENTATIVE DYSON noted libraries and interscholastic sports would also be included. SENATOR ELTON indicated the problem he has with that language is that when a charter school signs a contract, especially one with a certain life span, it is difficult to anticipate what some of the other services might be. He always assumed that contracts between charter schools and districts will always say the contract can be reopened for unanticipated events or expenses. He asked how long a typical contract is for. MR. KELLER said contracts are typically for five years. SENATOR ELTON maintained that it is difficult enough for a school to figure out what is going to happen next year with student enrollment, so to require that costs of administrative and other services be itemized for five years will not work. REPRESENTATIVE DYSON pointed out contracts are reviewed and renewed each year. He stated when a charter school committee approaches a district to figure out if it can operate a school, it needs a clear idea of the numbers. SENATOR ELTON said he understands the need for firm numbers but he is not sure why the standard should be higher for charter schools than for public schools which also deal with uncertainties on a year by year basis. REPRESENTATIVE DYSON replied that most public schools are in public school buildings. They do not have to maintain a building and pay for utilities. Some charter schools have purchased buildings, many have leased buildings and some are renting them. If the cost of fuel increases for a public school, the district will pay the heating bill but that is not the case for a charter school. MR. KELLER explained that those things were included in the bill because the sponsor thought it would be valuable for school boards to answer questions related to what the value of the charter school is. Number 1164 SENATOR ELTON noted there is as much danger in locking the charter school into agreed upon costs for other services as locking the district in. He said he understands the special problems of a charter school when it is not located in a district building but it is asking a lot to request a charter school and school district to sit down and anticipate what some of the other administrative costs are going to be over the course of the contract. He does not believe it is good for either the district or the charter school. REPRESENTATIVE DYSON replied that he removed two paragraphs from the bill that addressed itemizing costs. He noted one charter school that operates in a shopping mall in Anchorage uses the public library and does not need snow plowing services from the school district. That charter school is looking at ways to get more money back because it needs to determine whether it can afford its lease. SENATOR ELTON said that is his point. If a landlord adds a service down the road that the charter school has already charged the district for, the charter school is locked in. REPRESENTATIVE DYSON maintained that the charter school groups he knows are sophisticated enough to spell those things out when they enter into lease contracts so that there will be no surprises in terms of their property leases. SENATOR PETE KELLY asked if there are two provisions in which increased dollars will be going to the charter schools: one in the amount of savings to the district and the second in the local contribution. MR. KELLER's response was inaudible. SENATOR PETE KELLY asked whether the committee substitute contains a provision allowing the district to take administrative costs. He explained he was informed by some charter school people that one of the versions allows the district to keep a portion of the administrative costs. REPRESENTATIVE DYSON said it has always been his intent to allow a district to charge for its cost of administration. Most of the districts spend quite a bit of time trying to help charter schools and they should be paid for that. SENATOR PETE KELLY asked if the provision is in the committee substitute or in statute. MR. KELLER said he was under the impression it was a district by district decision. He stated that Anchorage has a set percentage for administrative costs. REPRESENTATIVE DYSON noted this bill makes no changes to that. Number 1414 SENATOR WILKEN clarified that he was mistaken and the statute does not say the school board must give the state allocation per student to the charter school. He asked how the estimated value of educational related services will be determined without burdening school districts. REPRESENTATIVE DYSON said, according to Deputy Commissioner Rick Cross, every enterprise, particularly schools, ought to have this kind of information at their fingertips. It is very difficult to manage any enterprise without knowing what it costs to provide a service. SENATOR WILKEN maintained that the phrase "estimated value or related services" will set up a war during every budget cycle to decide who is estimating what. He thought section 14 will create big problems for both school districts and charter schools. Number 1544 REPRESENTATIVE DYSON said when he started down this road three years ago, he would have told school districts to keep track of what it costs to do business and he would have called a school a "cost center." The districts do not capture costs that way. When charter schools come to the table, they cannot audit the districts' books. If a charter school wants a library, the district sets the amount. SENATOR WILKEN said, "I am trying to reconcile, on page 3, line 9, section (e) - the new section, with the existing section (a). Let's see if I can read this right. Section (a) says to me 'the school boards shall provide an annual program budget for the charter schools and that budget will be no less than the amount generated by the students' - and we talked a little bit about that - 'minus indirect administrative costs' and so that seems to be a shall - student equals some money, determined by generation minus the amount of money to take to administer that student. But then if we go to - and that could go up and down, of course. But then if we go to (e) - (e) says to me what we're going to do - it says 'must include' - so line 10, it says, 'charter school budget must include' - and the next three lines say to me, you can be no lower than - take all your students in the district divided by the number of students - or divide it into the number of dollars and the charter school can be no less than that amount. So while we've allowed in (a) for it to go up, (e) says you can't go below the average across the whole school district. So, are those two in conflict? Maybe the first question is, am I reading (e) right?" MR. KELLER said, "...I'm going to start with the intent of that section and the intent of that section is to make sure that some of the contribution in excess of the 4 mills gets distributed to the charter schools. And again, this is a matter of assurance to the charter schools that they are getting their fair share. We looked for the best wording that we could come up with and we got the advice, some advice here from Eddie Jeans and he suggested this wording. As to the conflict, I don't see it. I mean it is no less than in one place and then they add to that. I don't see the conflict, you know, it may be that." SENATOR WILKEN noted under the organization and operation of a charter school it says, "a local school board may exempt a charter school from other local school district requirements if an exemption is set out in the contract." He stated a charter school could tell a school district it wants one thing and not another during the negotiation process to define the charter school. He said in order for the school to be approved by the local elected officials, it becomes a lean and mean charter school. Therefore a lean and mean charter school is put in place but section (e) requires the district to fund it at the average of that school district's dollars per student. He said the charter school's funding would never go below the average of the district. MR. KELLER asked if Senator Wilken was referring to the existing section (3) to AS 14.03.260. SENATOR WILKEN noted AS 14.03.260 has sections (a) through (d) and HB 191 will add section (e). He explained that section (a) under funding for charter schools speaks to the amount generated by students enrolled in a charter school, less administrative costs - the revenue side. Section (e) speaks to the expense side. If section (e) is enacted, a district can never spend less than the average per student in the charter school than the average spent across the total district. He said if it says something about 4 mills, he does not read that. REPRESENTATIVE DYSON said he was speaking to local revenues on line 11. SENATOR WILKEN suggested that area be worked on further. He noted he does not have any problem with the intent of the legislation but he does not want to detract from general K-12 at a time of short dollars and he does not want to burden school boards with a lot of administrative things that are difficult for them to do. He said he certainly does not want to mandate the amount that districts must spend on charter schools. CHAIRMAN MILLER asked Bruce Johnson to testify. BRUCE JOHNSON, Deputy Commissioner of the Department of Education and Early Development (DOEE), stated DOEE and the State Board of Education are on record in support of school choice, specifically as it relates to the charter school law that is in place and the proposed changes. At the State Board meeting in the Spring of 1998, the Board indicated an interest in lifting the cap on the current number of charter schools allowed as well as the geographic distribution. The Board wanted to ensure that educational programs are based on State standards and agrees the sunset provision of 2005 should be removed. They wanted to clarify that charter schools receive local revenues in excess of required local contribution as well as the State determined basic need. In doing that, they recognized that we are moving beyond a pilot and a field test with charter schools and that charter schools have become institutionalized in our state, therefore DOEE needs to be involved. DOEE prepared a fiscal note which is absolutely essential to ensure that charter schools get off to a good start and that DOEE is able to provide technical assistance to the founders and staff of the charter schools. Number 1949 SENATOR WILKEN asked Mr. Johnson to comment on section (e) on page 3. DEPUTY COMMISSIONER JOHNSON said he was not privy to the conversations that occurred with Eddy Jeans. SENATOR ELTON asked how the allocation of costs in the 70-30 formula is applied to charter schools. He asked if that requirement applies to the district only or whether it gets to the contract level. DEPUTY COMMISSIONER JOHNSON said it is his understanding that the formula applies at the district level, not the individual school level. CHAIRMAN MILLER took teleconference testimony. MS. CAROL COMEAU, Anchorage School District Assistant Superintendent for Instruction, stated support for lifting the cap on the number of charter schools in the State as well as the geographic restrictions because they are a hindrance to a number of districts. She noted the Anchorage School District has questions about the intent of Section 2, line 11, including the itemized costs of administrative or other services to be provided. She noted that if she had to record the time she spends on charter schools and multiply the hours by the number of students in charter schools, charter schools would be paying back the district more than the district is taking for the indirect cost rate for her services. She noted the time she spends varies depending on the charter school and the issues. She asked for more information on Section 2, as well as Section 4. She questioned what the sponsor means by "operating cost savings" because not all of the schools in the district receive community school services or pupil transportation services. She noted the Anchorage School District has no problem with Section 3 because it already works very closely with the fire inspectors and fire marshall. As long as a facility meets the occupancy code for the number of students, the district can be flexible about housing in a non-district facility. She stated the Anchorage School District has questions about comparing the indirect cost rate (Section 4) at 2.4, which is the amount costed out for next year. She believes the school board will want to review and discuss that section further. CHAIRMAN MILLER said it is his intent to take testimony today and then hold the bill until Wednesday so that some of the questions raised can be answered. SENATOR PETE KELLY asked Ms. Keep-Barnes to reiterate the concerns she expressed to him at a constituent meeting to the committee, specifically her concern about administrative costs. MS. ANNIE KEEP-BARNES, a founder of the Chinook Charter School, said Chinook was the first elementary charter school in Alaska. She expressed strong support for HB 191. The bill will help charter schools to survive. Chinook is doing everything it can to make its school a place where different learning strategies and ideas are tested and where parents are active partners. She noted these changes can be made without forcing institutional changes throughout the school district. Chinook has been in operation for four years. It is open to all public school children in the Fairbanks North Star Borough. It offers an opportunity for middle school students to continue school through the eighth grade. Chinook parents are still finding that no matter how hard they work, the school board will always see the charter school as an add-on to an already strained budget. Charter schools only get an amount equal to basic needs which only covers salaries. She pointed out HB 191 will make a difference of $59,000 for Chinook Charter School. The school district would charge a 5+ percent administrative cost off of the top of Chinook's budget which will be a sizeable amount. Number 2295 MS. KITTY MATHERS testified in favor of HB 191 and, in particular, Section 4. Teachers and parents have actively worked with the school board to get a "piece of the pie" which has been a frustrating process. MS. MIKA MACK stated the Chinook School is large with a population of 95 students, but the school board views those students as less important. Parents do a lot of the maintenance work, provide supplies, and provide after school activities at no expense to the school district. Chinook does not receive funds for special needs students even though some attend the school. TAPE 00-13, SIDE B MS. GAIL MCCANN, a parent of a Chinook Charter School student, stated support for HB 191. She said she would particularly like to see the itemized cost accounting put into place because it is a basic business practice. She noted that Chinook Charter School has to fight an uphill battle for every penny it gets and it only gets the amount required by the state. Parents are subsidizing the school in every way they can and they need the legislature's help. She asked legislators to pass HB 191 and to provide full funding for all public schools. MS. JODY VANDERBILT, a parent of two Chinook Charter School students, stated strong support for HB 191. One of her children who struggled in public school is now a very good student at Chinook. Charter schools need more stable funding. HB 191 is a huge step in the right direction. MS. RACHEL STINSON stated support for charter schools and HB 191. She has three children who have attended Chinook Charter School since it was founded. To continue to function, charter schools need complete funding from the state or they need a mandate demanding local school boards to give them a specific portion of discretionary funds. MS. ALISON SEYMOUR, a parent of two students at Chinook Charter School, said the state passed the charter school law in order to provide for alternatives and innovations in education at a time when it was widely determined that something different needed to be done in the field of education. Chinook Charter School focusses on academics with a Montessori learning approach; any "frills" are provided by parents. Sending her children to a typical public school would cost the state considerably more. Chinook Charter School can no longer employ a reading tutor which her children need. Number 2129 MS. SUSAN FAULKNER, a parent of two students at Chinook Charter School, stated strong support for HB 191. She has been repeatedly frustrated by the funding situation - it seems that public money does not follow her children from public school to the charter school. She strongly believes that a public school should be supported by public money. Charter schools need to ensure they are entitled to the state, federal and local funding as other public schools are. MS. TERRI AUSTIN, a co-founder and teacher at Chinook, strongly supports HB 191 and encourages the committee to pass it as is. The first year Chinook was founded she was astounded at the amount of time it took to create a charter school. This year she is again astounded at how much time it is taking from teaching. She would love to see the funding issue cleared up so that the teachers at Chinook can truly focus on teaching rather than funding sources. MR. CARL ROSE, Executive Director of the Association of Alaska School Boards (AASB), said AASB has supported charter schools since the inception of the pilot program. AASB has asked that start up costs be addressed to ensure that local determination at the school board level is maintained. AASB supports lifting the cap on charter schools and the geographical requirement and the extension from five to ten years. AASB is concerned, however, that some of the requirements will have a chilling effect on the approval process in light of the funding problems that K-12 education is facing. Operating cost savings and the estimated value of educational services are unknown quantities and school districts are at a point where anything that entails a risk to go forward is less likely to be approved. AASB has worked hard with Representative Dyson's staff to put together a bill to serve the needs of present charter schools, but placing further requirements on school boards with the current funding problems will have a negative effect on the approval process. Number 1966 MR. JOHN CYR, President of the National Education Association - Alaska, said NEA was supportive of the first charter school bill and it supports HB 191. NEA finds is interesting that charter school advocates feel they are fighting for what they see as their share of the educational dollar when every public school is fighting for more dollars for education. The key problem is the amount of funding provided for K-12 education. The issue of itemized accounting is an interesting one - the same argument was made during the debate on SB 36. School districts said they were unable to break out the amount of administrative or other costs. NEA sees accounting of monies on the local level as a major problem that the legislature needs to determine because it is apparent that districts cannot or will not account for how dollars are spent for each individual child in each school. There being no further testimony, CHAIRMAN MILLER noted his intent to hold HB 191 until the next meeting on Wednesday so that the sponsor can work with the committee members who have raised concerns. He then adjourned the meeting at 2:35 p.m.