HB 203-SPECIAL APPROP: SCHOOL DIST. COST FACTORS  CHAIRWOMAN GREEN announced HB 203 to be up for consideration. SENATOR WILKEN moved to adopt the SCS CSHB 203(HES) version O/Cramer/4/26/01. There were no objections and it was so ordered. SENATOR WILKEN said that he and Representative Wilson had gone over this bill and agreed on all items but one. REPRESENTATIVE PEGGY WILSON, sponsor of HB 203, explained that the study is on school district cost factors. She said she didn't have a problem with Legislative Budget and Audit overseeing the study. She said that section 1 was the same, although the wording has been changed. She said she called Mr. David Cottrell, a school auditor, and asked him if the study could be done in the stated amount of time. He thought it could. A McDowell Group spokesman said the study could be done and Senator Therriault, Chairman of the Budget and Audit Committee, said he knew everyone wanted this study and it would be something the auditors could get to right away. REPRESENTATIVE WILSON recommended that the committee change the date back to next year and say that a preliminary report be done by January 30, with a final report due April 1. SENATOR LEMAN moved to adopt those dates and an immediate effective date on page 1, line 9. SENATOR WILKEN objected saying that this study is really important. It affects how schools get funded across the state. He thought they needed to sort some things out first. In 1998, the McDowell Group found that the 53 school districts didn't even have a common chart of accounts. This will be the third year that two auditors have been out trying to get the accounts aligned, so people can compare costs between districts. He felt the chart of accounts should be aligned across the state and working as they should be. He explained when they get some cost comparisons, they boil it down to a model that projects numbers that are valid for the 53 school districts. Then it has to get tested to see how real data reacts. He didn't think that they wanted the preliminary report next year, an election year, where it will get bogged down in politics. He said that this would definitely shift some money around and no one knew where it would go. SENATOR WILKEN concluded saying, "First of all we need to make sure the system is in place to measure and, secondly, that the model works and that it's valid and we have confidence in it. When that happens, then in '03 we can go ahead and work this into the foundation formula ...." CHAIRWOMAN GREEN asked if he was assuming that the information that comes in will somehow be part of an every other year correction. SENATOR WILKEN answered in his mind he thought so. MR. EDDY JEANS, School Finance and Facilities Section, Department of Education and Early Development (DOEED), commented that SB 36 requires DOEED to review and update the cost differentials every other year and to make recommendations to the legislature. This year, DOEED's report used the McDowell methodology (in SB 36) to update the cost differentials, but DOEED found the methodology was flawed. DOEED took revised calculations back to the McDowell Group and asked them to review them. The McDowell Group agreed that the methodology can no longer be used. Subsequently, the Governor's Education Funding Task Force has recommended that a new cost study be done. SENATOR WILKEN asked which year he was comfortable using for a report date. MR. JEANS replied January 15, 2003. He thought that studies in the past had been hurried projects, which has led to questions about the validity of the differentials. He didn't expect the cost study to be based on audited expenditures as previous studies had done. He envisioned the study to be based on other types of indices that demonstrate the variance in cost of delivering education around the state. CHAIRWOMAN GREEN announced a brief at-ease. CHAIRWOMAN GREEN called the meeting back to order and asked Representative Wilson if she wanted to comment on the amendment. REPRESENTATIVE WILSON said she talked to Senator Therriault about the Request for Proposal process and is ready to work at getting the education community on board when session is over. SENATOR LEMAN said he thought the amendment provided adequate time or he wouldn't have offered it. CHAIRWOMAN GREEN called for a roll call vote. SENATOR LEMAN voted yes; SENATORS WILKEN, DAVIS, and GREEN voted no; and the amendment failed. MR. DARROLL HARGRAVES, Executive Director, Council of School Administrators, said SB 203 has support and looks like an issue they can look forward to working with in the next few months. He said the Council supports this bill. "I do know that there are very few states in the Union who have attempted to take a snapshot of what's actually happening in schools to set this kind of a differential. Theoretically, charts of accounts are current expenditures and should have nothing to do with setting cost differentials. It should be based on what is happening in the communities' economy." He said that in the early '80s, they hired the Stanford Group to do the foundation funding study for us. It collapsed under its own weight as it did in other places. They attempted to describe school districts in terms of money. He cautioned that the language in the bill will set the philosophy for the direction of the study and is extremely critical to the results they are going to get. CHAIRWOMAN GREEN asked what language he thought was important to get. MR. HARGRAVES replied, "These terms reflect what you're going to spend to keep your household going…. I look at what the cost of those items are to get things into the community…." CHAIRWOMAN GREEN asked him to look at line 10 to see if that's improved language. MR. HARGRAVES said he thought it was an improvement. CHAIRWOMAN GREEN said she didn't understand what he was advocating for. MR. HARGRAVES summed it up by saying, "Don't look at the audited budgets of school districts to set cost differentials." CHAIRWOMAN GREEN asked if that was the issue that caused the McDowell study to be called into question. SENATOR WILKEN answered that it was a matter of opinion. It wasn't perfect, but it was a quantum leap over the report from 1982. He agreed with Mr. Hargraves. "It's not a question of what we spend today, but what should we spend. I think that's addressed in line 10 when it says, 'Should be based on the cost providing an education in each school district." SENATOR WILKEN said he wasn't sure they could do this report. He was concerned that they were imposing what the schools boards should be doing from the top down. He didn't think that meant it shouldn't be started. MR. HARGRAVES said he thought the language was O.K. as long as it has the right philosophy behind it. He repeated his major point, "The chart of accounts and audited budgets really shouldn't have much play in setting a cost differential." CHAIRWOMAN GREEN said she didn't know how they could avoid that. SENATOR WILKEN said he thought it was part of the equation. He agreed with Mr. Hargraves that the study shouldn't be driven by what is being spent, but on what should be spent. CHAIRWOMAN GREEN said she didn't think the language expressed what he way saying. She asked everyone for suggestion for better language. Number 1169 MR. JEANS said that he didn't think more wordsmithing was necessary. It provides a little guidance highlighting some areas that need to be looked at when considering the indices for cost differentials. He thought cooperative effort was needed in developing the RFP to ensure that it does what they want it to before it hits the street. CHAIRWOMAN GREEN asked if the language in section 1 gave DOEED authority to work with the study. MR. JEANS said he thought it did and that item 1 gives them additional guidance. He thought they shouldn't get any more prescriptive. CHAIRWOMAN GREEN asked what language allowed them to work with the different school districts. MR. JEANS replied that he intended to do that through the Department of Education and that was in the intent language. SENATOR WILKEN moved amendment #2 on page 1, line 6, to delete "to prepare and contract for the preparation" and to insert "enter into a contract for" and, on page 2, to delete line 4 to conform with a Department of Law concern. SENATOR LEMAN suggested deleting "and" on page 2, line 4 and to insert "and" on line 1 and change the semicolon into a period. The committee indicated approval of the change in wording. CHAIRWOMAN GREEN asked if there were any further objections. There were no further objections and amendment #2 was adopted. SENATOR LEMAN moved amendment #3 on page 1, line 14 to delete "between" and insert "among" and do the same thing on page 2, line 3. He also asked on page 1, line 12, if there was a cost differential for the shipping of school materials and supplies. REPRESENTATIVE WILSON replied that it depends on several things, but if you run out of something and have to run to the local store to get it, it will cost more in some areas than in others. SENATOR LEMAN said he wanted to compare costs in more than a lineal way. He wanted to compare more than Anchorage to Wrangell; he wanted to compare Wrangell to Petersberg and Barrow to Ketchikan and Bethel. CHAIRWOMAN GREEN asked if there was opposition to amendment #3. There were no objections and it was adopted. CHAIRWOMAN GREEN asked on page 1, line 10, if specifically saying, "the cost of shipping school materials and supplies," implies that that's the only extraordinary cost you would consider? She thought it would make much more sense to say, "the cost of the school lunch program, the cost of school materials and supplies, shipping, transportation costs." She would have preceded that with a phrase "such as" so they don't get so narrow in meaning. REPRESENTATIVE WILSON replied that the language at the end of line 12, "other costs that relate directly or indirectly to the operation of the school," covers a multitude of things. MR. JEANS said he thought the language allowed them a lot of flexibility. CHAIRWOMAN GREEN said she wanted it on the record that this language was meant to be very, very inclusive. SENATOR LEMAN moved amendment #4 to delete "shipping" on page 1, line 12. There were no objections and it was so ordered. SENATOR WILKEN moved to pass SCS CSHB 203(HES) from committee with attached fiscal notes and individual recommendations. There were no objections and it was so ordered.