SB 94-EDUCATION FUNDING  CHAIRWOMAN GREEN announced SB 97 to be up for consideration. She announced a brief at ease. TAPE 01-23, SIDE B    SENATOR TAYLOR, sponsor, said he first filed aspects of this bill as amendments submitted by Ron Larson in 1986 and 87 as they tried to change an inequitable formula for funding education. It was his intention that all residents of Alaska who pay taxes towards education would share the same level of pain and the funds would be distributed throughout the state and every school district would receive benefit. He said in Wrangell, they pay almost 9 mils of local property taxes to support education and he considered this a low level. He didn't think that there were any nurses in his schools and there weren't coaches in his elementary schools. There were no music programs or art programs. This is because of an inequitable formula that grants area cost differentials to school districts across the state, but basically leaves all of the school districts in Southeast Alaska, with a very small exception in Juneau, at the same funding base that Anchorage receives money. Anchorage has almost half of the children in the state, so through volumes of scale their school board can make discretionary appropriations to other activities in their community from their school district budget. His school boards wrestle with the question of maintaining the one or two janitors they have when they used to have five or six or do they have to "can" another one of them. He said they are receiving about $7,000 per student in Wrangell. The North Slope Borough receives $21,000 per student and has a student teacher ratio of 10 to 1. He has about 18 to 1. He explained that under the bill before them, every child in the North Slope Borough will receive an increase in funding, so will every child in Wrangell. Anchorage would receive the largest increase in funding. Senator Taylor explained: This bill increases funding across the board to education by over $47 million. It carries a state fiscal note against the general fund of about $29 million, maybe $27 million. There is no bill that is before you or that has been submitted so far that will cost the general fund less money than this one does nor is there any bill that will distribute this amount of money to the children of Alaska. How do we do that? We do that by expecting every citizen in the state who lives in a tax-based district to pay the same minimum amount. Forty-eight school districts in this state today either have full support or provide local support themselves. They provide that support up to a minimum of 4 mils. Each of you three members live in tax-based communities where you are paying a minimum of 4 mils on your home or other property you own in your town and that 4 mils has to be dedicated by the community of Anchorage, the community of Palmer, the community of Wasilla, the community of Wrangell, we all have to pay a minimum of 4 mils before we receive one thin dime of money from the state of Alaska. So, that's the rule under which all of us have to play. If you're a wealthy district and you have a tax base that is just extraordinary, you don't have to play by that rule. You get to play by a different rule. You only have to pay 45 percent of the cost of educating your children. You don't have to pay 4 mils. All this bill does is it asks that everyone in the state play on the same playing field - that everybody pays 4 mils on their house towards education. It doesn't seem to me like a lot to ask. What does that do to your formula? That allows you, because you would not be subsidizing with state general fund money the North Slope Borough and a couple of other school districts in this state fully. They would be paying their own cost of education and they don't even come near 4 mils…. SENATOR TAYLOR explained that Section 1 modifies the Public School Account that is already set up by including municipal contributions within it. It would be a contribution returned to the state by a municipality that had so much money left over after paying the minimum amount that each of you pay, that that money would be redistributed back through this formula for poorer tax-based districts. Section 2 says the state of Alaska will receive credit for federal impact aid funds that are received by REAAs. Today they receive 100 percent of the money that comes from the federal government, but the state is requiring them to only count 90 percent of it. "So, basically, they receive a 10 percent slush fund from the feds over and above the amount of money we're going to send to them." SENATOR TAYLOR said that the only thing he has asked is for all the dollars to be counted 90 - 100 percent. The other numbers in the section would provide for both vocational education special needs funding. At the bottom of the second section the words "not to exceed 45 percent of" [a district's cost of education] from the existing formula. This provides then for the full amount of 4 mils to be redistributed back across the state. He said the next section provides for the money that is left over or excess to come back into this formula that will distributed as indicated in Section 3. SENATOR TAYLOR said he had heard concerns expressed across the state by educators and others especially in the business community, that the state isn't spending very much money on vocational education. He said that the state isn't spending it because when SB 36 passed, they provided 20 percent over and above what people get in the regular formula for gifted children, young children that are challenged or having some difficulties, bi-lingual programs and voc-ed. They were all rolled into one and the districts had to figure out how to spend it. Because of federal mandates, the legislation where they are required to provider certain levels of funding and certain types of programs for those of our most challenged students, the vast majority of this money gets eaten up for those programs. A little bit may be there for bi-lingual and what's left over may be there available for a voc-ed program. As a consequence, what I've done here is I have provided a specific funding level for voc-ed at 3 percent. These numbers, by the way, Madame Chair, are just ideas thrown out for you. Some are very fearful of categorically funding voc-ed because they say every other program, then, will want to come in and have a specific funding category just like voc-ed does and that we should not fund voc-ed because somebody else might come and ask for the same thing. I think if it's justifiable, maybe we should be specifically and categorically funding or else you're never going to get it. An amendment that I wish to offer as this bill moves through is to also add categorical funding for school nurses. That's the only way I believe I can ever get a school nurse back into any district school that I represent. He said he would probably add that back into Section 4, which provides for voc-ed funding. Section 5 is just cleanup adding that new section. Section 6 brings the formula back into compliance with the numbers that have been provided for voc-ed. Section 8 is what we call the declining fund adjustment. For the last five or six years across this state, we have seen declining enrollments occurring in various communities. For the first time, I think, in several years, we're now seeing an overall increase in student population estimates and that's why for the first time in several years we're seeing an indication that the formula will actually have to go up by about $10 million next year just to fund at the same basic level that you currently have that formula set. For those schools, however, that are still suffering declining enrollments, under this formula - you are all familiar with the Wrangell Petersburg problem - because of student declines causing major shifts in the way the funding levels are applied, it can have a devastating impact on a district to just loose a very few students. SENATOR TAYLOR said he decided to submit a bill that said it doesn't matter what the decline is, whether it's only one student or 10 students, it shouldn't make any difference. It's still a loss of funding for that next year. He explained further: So rather than have a school district fall off a cliff, what we've provided for here is that even though that child wasn't there the next year, the school district would still receive 75 percent funding for that phantom child. The next year after that it would be 50 percent, the next year 25 percent and then zero. That would at least allow school boards the opportunity to adjust those budgets on a much gentler slope…" He said that Sitka lost 140 students last year and the impacts on their budget are so severe that they're contemplating terminating 14 - 17 staff people. He said that Section 9 is the most expensive part of this bill. He went with $4,150 to apply to all students across the state - an increase of $210. Section 10 provides for the Wrangell Petersburg "fix" and drops the number from 750 to 400 on student count for a school funding formula for three funding schools. In Wrangell and Petersburg, he said, they have three buildings, but are under a funding formula mechanism that funds them for as if they were only two. Section 11 repeals the 40 percent penalty provision, where new students moving into a rural school district, which as its enrollment increased would only receive 60 percent of the funding that student would have brought under the old formula. I believe that provision is illegal. I think it violates equal protection and I think sooner or later, we in the legislature are going to be sued over that one and when we do I don't think we have a leg to stand on. CHAIRWOMAN GREEN said she had vaguely remembered some of the rationale and had also voted against SB 36. Number 1584 SENATOR WARD asked how this bill affected charter schools. SENATOR TAYLOR replied that it doesn't affect them, but it provides additional funding. He added that he was frustrated because the old formula contains an area cost differential, which was based upon studies done of what it cost to live in various areas of the state. He does not want to provide for another study, but he wanted to tell the Department of Education professionals who actually audit every single school district every year to go out and use consumer price indexing and give the legislature an objective report of what it truly costs in the various regions and communities and adjust the formula accordingly. He said this had never been done. This would be done every two years. He recollected that rationale for the 40 percent concept came up because no one could understand how the numbers had gotten so distorted that some school districts were receiving $20,000 per student and others were receiving $6,000. "When you actually look at the formula, much of it is driven by the area cost differential that everything is multiplied against at the end of the formula." SENATOR TAYLOR said that this redistributes and appropriates over $47 million for kids. "I know that is a huge amount, but it also the lowest amount from the general fund of any of the bills that you'll be presented with this year…." He said that the poorer communities of California were faced with the same problem about 12 years ago. Poor agricultural families used the equal protection argument and asked why they were getting paid a certain amount for education, but the ones who were rich in Hollywood were getting paid more. The judge couldn't find a good reason for it other than power politics. "The same thing has happened to us…." MR. CARL ROSE, Executive Director, Association of Alaska School Boards, opposed SB 94. They do not positioned to scaling back a system of education for some to provide more for others. He thought that repealing the funding floor was a critical issue. He said: My recollection of SB 35 is similar in some cases, but different in others. As I recall the discussion behind SB 36 was to first provide equity across the state through a distribution of funds and once that was accomplished, we would address adequacy. I'm not sure that equity was accomplished, but nonetheless, that was the reason for the passage of that bill and we still struggle with adequacy. The issue back then was the redistribution of state funds. The issue with SB 94 once again is a redistribution of funds… He said he served on a task force that dealt with the adequacy that was required under SB 36. He was concerned that they had never recognized that PL874 dollars were in lieu of taxes, but now they are being told that 100 percent of that money will now be withheld in lieu of taxes. He didn't know why people would file for that money if they get no benefit from it, other than to create a huge hole in the foundation formula if those monies are not generated. MR. ROSE did not recommend that as a strategy, because they loose on both ends of that argument. The reason people will eventually apply for this money is because they get some credit for it as a result of the 90 percent deduct. He said there is a long-standing state policy that said that four school districts - North Slope Borough, Valdez, Unalaska and Skagway - were an anomaly. "We were trying to create a foundation formula for the entire state and didn't know how to deal with the anomaly of wealth divided by population. In the case of Skagway, when the railroad shut down in 1983, they were left in an economic disaster, but they created a tourism corridor and as a result of that effort they have a deep water port, an ore terminal, hotels, a railroad and a thriving tourism economy. Six-hundred people live in Skagway full-time and if you take all of that wealth and divide it by 600 and it puts them into a different category. They mayor of Skagway was there under the SB 36 discussion and said that back then they were paying the in excess of 53 percent of the school district budget. He didn't know what the current figures were, but he guaranteed them that the 45 percent figure they are under is being exceeded. They have the ability to pay more and they have. "These school districts, though this provision is a long standing public policy, this is a radical change and a redistribution and I don't think many people have had a chance to really think about it." MR. ROSE said he supports vocational education. That was talked about in the 20 percent categorical funding that was provided under SB 36 for special education, bi-lingual and vocational education. An argument can be made equally well, if you're going to take vocational education out and fund that, we have tremendous special education needs that aren't being met. The money that goes to special education is coming directly out of regular instruction dollars. So, the issue of the 20 percent, to begin with, is a larger issue than just the vocational education. I don't begrudge vocational education being treated separately, but special ed and bi-lingual education are also paying a price as well. MR. ROSE said has seen many foundation rewrites and he agrees with some of the studies. SB 36 was based on a study, but it was based largely on expenditure data from 1996 and to his knowledge, school districts were getting and spending all that they had and it was inadequate. "To take that snapshot and project it forward into a new foundation formula left us further behind." The funding task force recognized that they actually need good empirical data so they can make changes. They specifically said they would not encourage any more changes to the current foundation formula until they had the empirical data that would underwrite those decisions. To turn over to the Department of Education and Early Development the responsibility of coming up with an appropriate cost factor without anything to hang that decision on subjects them to quite a bit of lobbying. My main concern in all this is we're talking about all the things we didn't agree with SB 36 and we tried to deal with it then and we couldn't get there. I think what SB 94 does is brings all that back to the table, again, but it's not doing it in an open fashion. What we're talking about is redistribution of wealth here. And so, I do have some concerns and I'm also sensitive to the concerns that have been expressed for Wrangell and Petersburg and I agree with these. In fact, these were part of the discussion under SB 36 that didn't get through. I don't think I come before you to say I just want to trash on this bill. That's not the case. But I think what we're doing is we're changing some long- standing policies in this state in how we treat districts that are a fiscal anomaly with the rest of our districts. We're going to change that policy in one fell swoop and redistribute that money. Without the recapture clause that would require districts to pay back, you don't have the money to pay for this bill. So, I would just want to talk about the recapture. The way you get the money for this bill is take from those who are struggling right now and I know you will say that the North Slope has a lot of money along with Valdez, Unalaska and Skagway, but it's the plight that they have and they are struggling to provide an education as it right now. To alter that ability for those school districts simply to redistribute the money, what we need is a increase of funding for the purpose of educating our children state-wide. So, any time that we start to look at increasing funding for education to try and imbed these standards that we're trying to do, it requires an awful lot of need that needs to be addressed. The suggestion comes to me that we're just throwing more money at the problem. I don't believe that. We've never invested in the cure. There is a solution and it was going to require us to align our systems to provide the professional development that we need and assist kids with intervention to help them take and successfully pass their exam. We've done all this and we haven't made the investment. MR. ROSE said they would like to work on a funding bill that meets the needs of all Alaska's students. Number 655 SENATOR DAVIS asked him to elaborate on why those districts are struggling to pay for education. MR. ROSE replied that he could speak in the case of Skagway: The amount of money that they receive in Skagway, even under this bill, they would loose an additional $65,000. I think that their budget right now is somewhere in the area of $1.3 million and they receive about $800,000 from the state. So, a good portion of that money already comes locally. Local contribution is severe, but they have the money and they readily put forward what they can. It's not that they have an open checkbook; they are limited to what they can contribute. CHAIRWOMAN GREEN said they would look this year at how they could make improvements in education funding. She set the bill aside.